ESG Investing

ESG Investing screens companies on Environmental (carbon emissions, water use, waste), Social (employee safety, supply-chain labour, community impact), and Governance (board independence, audit quality, related-party transactions) factors alongside financial metrics. Major scoring frameworks include MSCI ESG Ratings (AAA to CCC), Sustainalytics ESG Risk Rating (0–100, lower is better), and S&P Global ESG Scores.

India context — BRSR: SEBI mandates a Business Responsibility & Sustainability Report for the top 1,000 listed companies by market cap from FY23 onwards. BRSR Core (an audited sub-set of 9 attributes) is mandatory for the top 150 from FY24, expanding to top 1,000 by FY27. This is the primary domestic ESG-disclosure backbone.

INR example: SBI Magnum ESG Fund (AUM ~₹5,800 cr as of FY25) tilts toward companies with high MSCI ESG ratings and excludes tobacco, controversial weapons, and high-emission coal miners. Other India ESG funds: Axis ESG, Quantum India ESG, ICICI Prudential ESG Exclusionary, Mirae Asset ESG Sector Leaders ETF.

When relevant:

• Investor wants sustainability tilt without giving up diversification
• Institutional mandates (EPFO, pension funds) increasingly screen for ESG
• Comparing two large-caps where financials are similar — BRSR Core can be a tiebreaker

SEBI caveat: ESG ratings from different agencies can disagree sharply for the same company (low correlation ~0.4–0.6). SEBI introduced an ESG Rating Provider regulatory framework in 2023 requiring registration and methodology disclosure. Educational only — not advice. AMFI ARN-314872.

Related terms: Index Fund, ETF, AUM.