Why are ESG scores important in ESG investments?


The ‘E’ S’ and ‘G’ in ESG funds are the three pillars of this mutual fund scheme. ESG stands for Environmental, Social and Governance. These are the parameters which every ESG fund manager goes through before picking stocks to build a diversified and sustainable portfolio. The ESG metrics play a vital role in deciding where the fund will invest as the fund filters through these three parameters and only invests in securities and companies that are ESG compliant.

ESG investors are focused on sustainability and social responsibility. Hence, they expect an ESG scheme to tick all the right boxes when it comes to building a portfolio of stocks of companies that score high in all three components i.e. Environmental, Social and Governance. Companies with low ESG scores are less likely to receive funding from ESG investors. The focus here is not just to earn capital appreciation, but to also invest with the hope of reducing carbon footprint by excluding companies that heavily contribute to global warming and climate change.

Approach towards ESG investing

The fund house only considers quality companies that can generate sustainable growth. The fund house believes that only companies that run for the long term and companies who take account of their impact on all stakeholders may be able to sustain supernormal growth and returns.

Consider starting a SIP

A Systematic Investment Plan is an investment tool where ESG investors can invest small fixed amounts at regular intervals over the course of a stipulated time period.

Here’s a simple example to help you understand how you can create wealth by starting a SIP

Say you want to build a corpus worth 12 lakhs using ESG Equity Fund over the course of 10 years. You can do so by starting a monthly SIP of Rs 10,000 in ESG Equity Fund. At the end of your SIP investing journey, not only will you have built a corpus of Rs 12 lakh, but you might also be able to earn some capital appreciation over the invested amount.

SIP investors are even known to benefit from the power of compounding and rupee cost averaging. When you start a monthly SIP, every month on a fixed date a predetermined amount is auto-debited and transferred to the fund. One can target their long term financial goals by disciplinarily investing via SIP.

“This is an investor education and awareness initiative by Axis Mutual Fund. Investors have to complete a one-time KYC process. Visit www.axismf.com or contact us on [email protected] for more information. Investors should deal only with registered Mutual Funds, details of which are available on www.sebi.gov.in – Intermediaries/Market Infrastructure Institutions section. For any grievance redressal, investors can call us on 1800 221 322 or write us at [email protected] or register complaint on SEBI Scores portal at https://scores.gov.in”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this:
Available for Amazon Prime