Performance Analysis of Select ESG Funds in India

Abstract

The creation of the “Jones Sustainability Index” in 1999, the “Asia Pacific Index” in 2009 and other indices have made it easier for investors to select companies with a best-in-class approach to ‘economic’, ‘environmental’ and ‘social issues’(ESG). ESG investing is now percolating in response to public demand for ESG investment products and the adoption of ESG by mainstream investors in the West. In line with “United Nation Environmental Programme (UNEP)” in 2014, the Indian government started the process of inducting Sustainable Finance schemes in the Green energy, non-renewable energy, technology hardware, and renewable energy sector mainly through startups in the form of Business Loans to MSME sector by various lending institutions. In this research paper, an attempt has been made to analyse the performance of select ESG for 24 months after the outbreak of Covid-19 based on return and risk evaluation. This secondary data-based analysis includes four ESG funds and uses tools like ‘Compound Annual Growth Rate (CAGR)’, ‘Standard Deviation’, ‘Sharpe Ratio’, ‘Treynor Ratio’, ‘Alpha’, ‘Beta’ and ‘coefficient of determination’. The study expects to benefit the stakeholders in choosing appropriate ESG scheme. In terms of ‘CAGR’, ‘Sharpe Ratio’ and ‘Treynor Ratio’ most of the funds have underperformed. Most of the funds are defensive during both time frames. For the entire time the degree of diversification is quite satisfactory for most of the funds.