Outflows from ESG funds took place for the second year in a row, with the June quarter seeing exits of ₹590 crore up from an outflow of ₹470 crore in the March quarter due to profit booking, reported Business Line.
Yeartodate, there has been an outflow of ₹1,060 crore, compared to exits of ₹1,020 crore last year. This is in contrast to the aggregate inflows of ₹1.83lakh crore for the mutual fund industry in the same period.
With no new fund launches in the last two years and steady outflows, the AUM of ESG (investing under ‘environmental, social and governance’ principles) schemes have stagnated at ₹10,00012,000 crore, according to a Morningstar India report.
As of Juneend, the assets of ESG funds, at ₹11,040 crore, were up just 2 per cent year-on year. While sustainable funds saw outflows of ₹1,930 crore last year, the overall asset increased marginally on mark-to market gains, it said.
While ESG as a concept for investment is still in its nascent stage with only 11 sustainable funds, the market is also quite concentrated. The top five sustainable funds — SBI MF, Axis, ICICI Pru, Kotak and Aditya Birla MF — account for 87 per cent of overall sustainable fund assets, with SBI MF accounting for 45 per cent of it at ₹4,750 crore.
Currently, there are eight actively managed sustainable funds, one passive fund, and two global sustainable feeder funds. Active funds account for 97 per cent of overall sustainable fund assets. Investments in the global sustainable feeder fund have been frozen by the SEBI caps on overseas investments in MF schemes. Equity sustainable funds are rated well, according to the Morningstar Sustainability Rating, which is a peer group relative measure of ESG risk.
Within their global category (Indian equity), six funds carry a Sustainability Rating of ‘5 Globes’, two funds are at 4, and one fund has ‘2 Globes’.
Over the past few years, SEBI has set sustainability disclosure norms — the Business Responsibility Sustainability Reporting Guidelines. These make it mandatory for the top 1,000 listed companies to make sustainability disclosures.
In a recent regulation, SEBI stepped up these disclosures by announcing a set of key indicators — BRSR Core — on which companies are to provide reasonable assurance.