Understanding ESG in detail and what benefit it brings to businesses

1. Understanding ESG in detail and what benefit it brings to businesses www.avendus.com/india

2. The newer funds When we talk about fund management, a business owner often relies on his or her financial advisory services. A wealth manager usually provides information and advice regarding different kinds of funds that the business owner should be investing in. There are mutual funds, long-short fund, long only funds and also, now, the ESG funds. ESG funds are those funds that help investors of a business, or potential business investors, to understand the current way in which the business is being carried out. The ESG funds reflect a company’s ethical practices in areas of environments, social and governance benefit. www.avendus.com/india

3. A deeper understanding Although there are no strict customs or standards as to what the ESG companies constitute, every fund house has their own set of strictures and parameters in order to judge companies that have been registered in ESG in ordered to shortlist stocks. Do remember, that these finds mostly do exclude those sectors that are known to be harmful in the societal perspective such as liquor and tobacco. If we look at the environmental side of it, it is majorly about checking the company’s carbon footprint, recycling waste and consumption of water. It is also known to keep firms with poor governance factors and have had regulatory issues out of the list. www.avendus.com/india

4. So why is ESG important? If you look at the concept closely, you will understand that the whole idea of this is based on the fact and also belief that when pressure is laid on the corporate world by forces such as large investors, they are obliged to behave responsibility and adhere to the social, environmental and governmental norms. Next, we’ve seen in the part decade how the climate has changed, social perspective and preferences have shifted and evolved and majorly, a company that has issues with governance can be of risk to earning of corporates and of course, the investors. Companies that are answerable to the ESG norms, see to it that they leave no stone unturned in being as competent as possible. www.avendus.com/india

5. Why should we care about this? The answer to this question is more than one. First of all, it is important to note around $2.96 trillion have been invested,0020globally, in those funds which have been managed and made with ESG focus, as per Morningstar. But in India, this concept is just slowly blooming. Although we do not possess a lot of data on ESG firms here, the fund houses have their own methods to scrutinize companies to qualify then for ESG. Given the current investment mandate, and the limited universe of investment that we have, the funds that are ESG compliant might be quite similar to the ethical funds that already exist. www.avendus.com/india

6. Way ahead The SEBI had recently made it mandatory for the top 1000 companies that are listen to make an annual business responsibility report (BRR) in the beginning of the year. The BRR tells us in detail about the exclusive ethical measures taken by a company in running the business. Financial thinkers are hopeful that this would help in expanding the ESG universe later. So, a business right now may go ahead and invest in ESG funds for ethical reason, but they’ll also have to wait for a long time to gain benefits. www.avendus.com/india

7. Thank You www.avendus.com/india