ESG investing, an investing method that considers environmental, social and governance factors of a company while investing, has been picking up pace in India in recent years. "There's been a meteoric rise in ESG oriented investing in recent years. As of 2019, global sustainable investment topped $30 trillion. That's up 68 percent since 2014 and a whopping tenfold increase since 2004," says a McKinsey report.
The uncertainties witnessed in the last decade, be it economic downturn or the pandemic or the climate change, have raised awareness about being mindful. ESG is thus becoming an increasingly important priority for Indian funds and investors. Some investors have launched dedicated ESG funds or portfolios. And, companies are today forced to come up with ESG-oriented systems in their operations to effectively implement, manage, and monitor these goals.
ESG investing takes into account business practices such as diversity in the team, climate impact, among others. "Every sector is being scrutinized today by experts and concerned citizens alike. In a time when information moves quickly and without hindrances, it would be hard for any fund in India, or anywhere else for that matter, to discount the importance of ESG. While some funds may have institutionalized ESG systems better than others, the broad acceptance of ESG is now prevalent across the industry," said Reihem Roy, partner, Omnivore. Every company Omnivore invests in is subject to independent ESG diligence and regular audits.
WHAT'S DRIVING THE CHANGE
The key factor driving ESG-oriented investing is societal awareness across all stakeholders, particularly the younger segments of the population. The access to information, in all languages and across tier I, II, III and above, enabled by social media and tech in general, has made them sensitive to environmental, social, and cultural issues.
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