Boosted by the pandemic, the Environment Social and Governance (ESG)-focused mutual fund assets have grown 4.7 times between November 2019 and November 2021 with the cumulative AUM crossing Rs 12,320 crore among 10 funds, and is on course to grow much bigger as more such schemes are being launched, says a report.
However, this AUM is only a paltry 0.3 per cent of the over Rs 38.45 lakh crore mutual funds industry as of end-November 2021 and is only a negligible portion of the global fund pool of $35.4 trillion as of end 2020.
As against this, Canada has the highest proportion of sustainable investment assets at 62 per cent of the total mutual fund AUMs, followed by Europe at 42 per cent, Australia at 38 per cent, the US with 33 per cent and Japan at 24 per cent.
Asia, excluding Japan, has less than 1 per cent share in the global sustainable asset pool, says a sustainability report by brokerage Motilal Oswal Financial Services.
Since the launch of the 17 sustainable development goals (SDGs) by the United Nations in 2015, the sustainable funds grew multifold annually at 11 per cent between 2016 and 2020 to $35.3 trillion in 2020, which is a full 36 per cent of the global AUM, up from 28 per cent in 2016, according to the report.
Aggregate domestic ESG funds AUM rose 4.7 times to Rs 12,320 crore in November 2021 from Rs 2,630 crore in November 2019, the report said in a weekend note.
On the back of the fast growing ESG horizon since the pat five years, which got a remarkable acceptance among investors after the pandemic hit the world in March 2020, the report expects the trend to continue.
It can be noted that the fund grew in the country primarily during the pandemic as seven of the 10 ESG funds were launched only after January 2020.
Over the past one decade, domestic mutual fund assets rose to Rs 38.45 lakh crore as of November 2021-- over five-fold growth from Rs 6.82 lakh crore in November 2011.
Not just that the ESG funds are very low, when it comes sustainability performance too the country ranks very low. At 120th out of 165 countries, the country fares poor in terms of total progress towards achieving all the SDGs, as per the United Nation's own sustainable development report 2021.
However with New Delhi committing itself to 2070 deadline to achieve net-zero emissions the progress towards sustainability should gather pace in the coming years, notes the report.
Being the third largest greenhouse gas emitter, India announced at the 26th Conference of Parties (COP-26) in Glasgow last month that it will achieve net-zero emissions by 2070.
Further, it also committed to raise the non-fossil energy capacity to 500 GW by 2030, reducing 1 billion tonne of projected emissions from now till 2030 and achieving carbon intensity reduction of 45 per cent over 2005 levels by 2030.
With global warming and climate change have emerged as the world's greatest risks, various countries have set targets to achieve carbon neutrality one hand and companies on the other are already experiencing the financial consequences of failing to act on sustainability as many countries have implemented regulations such as carbon taxes and penalties.
Already, financial and banking players have integrated ESG rules into their funding criteria, which augurs well for more funds to find their ways into the ESG space.