Why You Should Invest In Environmental Social And Governance Funds

By Author: avendusgroup
Total Articles: 131
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Social consciousness is becoming extremely important today. From social media to individual thinking, to companies: everyone is becoming more aware of their environmental footprint. Companies are tweaking their identities to become more sustainable and conscious about the environment by enforcing operations that are environmentally friendly.

As India is getting more serious about the impact of pollution and climate change, companies are employing fair labor, environmental conservation, and ethical policies. Thus, attracting interest in ESG funds India.

What are ESG Funds?
ESG represents Environment, Social and Governance respectively.

Environment targets preservation and conservation of natural resources. It is crucial for companies to endorse greener initiatives for the welfare of the environment and sustain resources for the future generations.
In addition to being ‘good for the environment’, companies that are Environmentally compliant are also safeguarded against regulatory misconducts, showing more potential.

Social targets social responsibility. Companies that are genuine ...
... and care about the wellbeing of their workers. Firms that advocate for employee safety, take measures to avoid occupational hazards, treat all genders fairly and demonstrate equality are regarded as socially responsible. Through CSR practices, charitable giving and social and environmentally conscious investments, these companies maintain a good relationship with their employees and stakeholders alike.

Governance targets the basic structure, and the foundation the company stands on. Investors can better place their trust in the company when the company operates with transparency and accuracy. Allowing stakeholders to vote on important issues, not using political contributions to their favor, and not engaging in illegal practices reinforce trust within their investors and stakeholders.

Now that ESG funds are defined, let’s move on to why investing in them is a good idea.

Why are Environment Social and Governance funds a good investment?
With regulations becoming stricter, companies that are not ESG compliant are going to get penalized for non-adherence to regulatory factors. There is a greater advantage involved with investing in companies that follow Environment, Social and Governance standards. When it comes to long-term investments, ESG funds mitigate non-financial risks as they do not indulge in harmful environmental impacts, take social risks, and maintain Corporate Social Responsibility measures.

During the market instability related to COVID-19, many companies with substantial ESG compliance presented lower volatility than non-ESG compliant companies.

David Gardner, cofounder of The Motley Fool said: “Make your portfolio reflect your best vision for our future. Always be thinking ahead. Be optimistic. Think about the world that you want to create.” ESG companies perform good corporate behavior that leads to better business and financial returns.

An asset management company is answerable to the SEBI - Securities and Exchange Board of India. The SEBI and AMFI mandate certain practices and guidelines that convince investors to place higher trust in AMCs:
● The company should not invest in any business schemes unless it fully discloses its intentions to invest in the offer document.
● Required to submit quarterly reports regarding its activities and compliance with the regulations to the trustees.
● The key person of the AMC should have a clean record.

With strict guidelines, a clean code of conduct and practices enforcing Environment, Social and Governance criteria, Environmental Social and Governance funds are profitable for companies, stakeholders, and the society.