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Fad over ESG investing fading

Suresh P Iyengar Mumbai | Updated on July 20, 2021

Better options, fewer NFO launches dampen interest

Inflows into ESG (environment, social and governance) funds plunged 97 per cent in the June quarter to ₹26 crore against ₹1,200 crore in the March quarter due to better performance of actively managed funds and launch of interesting initial public offerings.

Besides, absence of new fund offering in the ESG category also slowed down the inflow.

The initial fad on ESG investment has waned faster when compared to inflow of ₹3,750 crore logged in the December quarter.

As of June-end, the asset under ESG funds nearly tripled to ₹11,970 crore against ₹4,210 crore logged in the same period last year, said Morningstar India in a report.

‘Less incremental flow’

Kaustubh Belapurkar, Director, Morningstar India, said majority of the flows in sustainable funds in India have come in during the NFO stage, with incremental flows post-NFO in existing funds are very limited.

 

There was only one NFO in the June quarter, while in the previous quarters there was at least seven fund launches, leading to higher inflows.

Flows in first half of this year was lower at ₹1,230 crore against ₹3,630 crore in the second half of last year.

There were five new fund offers in the last December quarter while the same in the first half of this year was only three including two feeder funds into global sustainable funds. Indian investors currently have access to 11 India domiciled sustainable funds with eight active, one passive (ETF and fund of fund) and two feeders into global sustainable funds. Active funds account for 93 per cent of the overall sustainable fund assets under management.

Top heavy

Sustainable fund investing is still relatively a new concept for Indian investors and may take some time for awareness to build for flows to come into existing sustainable funds. ESG category has only 11 funds and market is quite concentrated with top five accounting for 86 per cent of the overall sustainable assets.

SBI Mutual Fund leads the pack with AUM of ₹3,920 crore while Axis MF and ICICI MF have asset of ₹1,920 crore and ₹1,840 crore.

Kotak MF and Aditya Birla ESG funds have asset of ₹1,700 crore and ₹970 crore.

Published on July 19, 2021

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