What is CMP in the Stock Market?
In previous times, the stock market was a physical space that traders set up offices and desks at, and stocks, shares and bonds were traded in physic…
29 Mar, 2021
7 min read
2385 Views
Over the last few years, investing through funds has gained considerable popularity, and investors across the globe are looking to give their savings an exposure to the equity markets.
In this process, a number of diversification and growth strategies have come forward. In the traditional methods of investing, fund managers usually crunch the numbers and keep their purview of qualification limited to technical indicators, company leadership and the company’s financials in addition to the position of the business model in the context of the larger economy and future developments. ESG funds essentially take a different approach to curating investment opportunities by selecting companies based on three criteria - and these are environmental impact, social factors and governance factors. This does not mean that ESG funds leverage a strategy that is disconnected to the traditional principles of investing. From another angle, ESG strategies are essentially a product of the traditional approaches to investing. Let’s see, by understanding what really drives ESG funds, and what the craze is all about.
To help you understand why you should care about ESG funds, you first need to know that ESG companies account for a major chunk of assets under management across the globe. To be precise, they account for $22.9 trillion worth of assets. Other estimates suggest that every one dollar of four that is invested can be qualified as an ESG investment. Well, ESG-compliant investment opportunities are everywhere around you, and there is a reason why everyone is talking about them.
ESG funds essentially invest in companies that take a green approach to their businesses, make socially responsible decisions and promote good governance policies. Some analysts premise the performance of ESG funds on a few beliefs that seem to make sense when we look at the global economy holistically. Let’s see how. Consider two cement producing companies, one of which is actively working to produce their cement with zero carbon emissions. The other company, however, is simply leveraging traditional methods of cement production, and continues to operate on a significant carbon footprint. Which company will perform better financially? Well, in the short run, the latter company might be able to maintain a cost advantage and deliver slightly higher returns, someone who thoroughly understands the scope and potential impact of climate change will bet on the former company - because their practices are sustainable in the long run.
Now consider a similar example but let’s keep our focus on the S of the ESG. Consider a nuclear energy company that disposes their nuclear waste in the vicinity of the power plant - and as a result, is exposing the nearby communities to hazardous, radioactive waste. However, there is another company that leverages modern waste disposal techniques like deep geological disposal as a socially responsible step in the process of doing its business. An ESG strategy will bet on the latter company, because it places value on conducting business in a socially responsible manner to keep it sustainable in the long run. The former company might simply be banned by the regulatory authorities, or face resistance from the learning communities. The logic is not rocket science.
Well, so what can we say about the performance of ESG funds? There are multiple things to be considered in the process. When we talk about socially conscious business, do we bet on a company that promotes diversity in their teams or hiring strategy, or one that is committed to educating the communities that it depends on? When we are talking about sustainability, do we favour a company that uses clean energy, or uses recyclable components, or one that operates on the smallest carbon footprint? Depending on the causes that are chosen as qualifiers, ESG funds can return variable performance. In the US, most ESG funds outperformed the S&P 500 index’s returns over the year. According to Forbes Advisor, however, qualifying funds on a certain ESG dimension can be difficult to correlate with growth - giving adequate exposure with effective diversification ultimately requires one to look beyond just ESG funds.
In India, ESG funds like the Axis ESG fund have returned 30%+ over a span of nine months, while other ESG funds like the ICICI prudential ESG fund have returned a mere 10% since inception. Returns across ESG funds vary drastically. But in the US stock markets, 44% of the ESG funds can be spotted in the top quintile, while only 10% can be spotted in the bottom quintile in terms of performance. This shows that there is a significant variability, but ESG funds might be an excellent means of diversifying your existing portfolio.
However, 84% of investors are actively considering adding ESG funds to their portfolio today. But in the background, some pressing questions remain, and also makes one wonder about the ethics behind an ESG based strategy. Do some causes pay off better than others? Is it more valuable to invest in a company that promotes diversity in their governance and leadership profile, or should we choose ones that empower women? More importantly, which social causes actually qualify as socially responsible causes, and how will funds based on ESG strategies perform when some sectors or commodities post significant growth? While these questions remain to be answered, analysts suggest that ESG funds might be particularly helpful for people that are easily swayed by short term market movements - and that ESG funds can help them stay invested through such times, since the companies that they have invested in share some values that are dear to them! What is your take on ESG funds?
Interested in finding out about new avenues of investment? Then log on to www.angelbroking.com to discover more, with our free reports and other resources!
How would you rate this blog?
Related Blogs
Translate the power of knowledge into action. Open Free* Demat Account
Latest Blog
-
12 May, 2021
7 min read
What is the endgame for the...
With vaccinations in full swing despite the onset of the COVID pandemic, Indian stock markets seem to be taking a rather relaxed approach to COVID 2.…
-
28 Jan, 2022
7 min read
Long-Term Investments
Confused about what is meant by long term investments, under assets on a company’s balance sheet? Here’s all you need to know about this component of…
-
27 Mar, 2021
7 min read
Twitter as a market forecasting tool
Most of us use one or more social media platforms in today's digital age. Remember the days when Facebook came into existence, and how everyone was f…
-
14 Aug, 2022
7 min read
What is Back Stop?
Backstop refers to the last type of support provided for unsubscribed shares or securities offered in the sale of unsubscribed shares in the stock an…
-
02 Apr, 2023
6 min read
Top 10 Multinational Companies in India
India has become an attractive destination for leading multinational corporations. The entry of MNCs into India brings numerous benefits, including t…
-
29 May, 2022
5 min read
Why Elon Musk Bought Twitter: Impact on Investors
Understand what the implications of Elon Musk’s Twitter purchase are.
-
14 Jun, 2021
8 min read
All you need to know about SIP
Everyone has heard of SIP by now because it has become quite a commonly quoted term – even if it isn’t always used correctly.
-
06 Jul, 2023
3 min read
Interview with Kamini Shah, Chief...
We have remained dedicated to improving our operational metrics and driving significant transformation within our organisation, resulting in notable …
-
06 Jul, 2022
5 min read
Top 9 Upcoming Dividend Paying Stocks in...
The upcoming dividend stocks will be mentioned in this post, along with other crucial dividend-related concepts.
-
29 Dec, 2021
5 min read
Stocks to Watch: Reliance Industries,...
Reliance Industries Share Price: A subsidiary of the Indian conglomerate Reliance Industries Limited, Reliance Industries Limited works in the refin…
-
28 Jun, 2021
8 min read
Upcoming Healthcare Industry IPOs in 2021
All eyes are on the healthcare sector. Not just expectantly waiting for it to save the world for Covid-19, but also as an investment avenue.
-
25 Jul, 2021
12 min read
All About Commodity Market In India
Commodity markets are platforms that enable trading, buying and selling of commodities such as raw materials or primary products.
-
31 Jul, 2021
9 min read
Should you invest in the Paytm IPO?
The Paytm IPO has been making headlines for over a month now, so you have undoubtedly heard about it too.
-
15 Jun, 2021
8 min read
All you need to know about Lump sum investment
The term lump sum has become more relevant because of the rise of SIP investment or Systematic Investment Plans for mutual funds.
-
03 Oct, 2021
7 min read
IPO Advantages and Disadvantages
An initial public offering (IPO) is the process through which a company goes public by selling its stock to retail and institutional investors. Looki…
-
18 Feb, 2022
6 min read
LIC IPO Details: Should You Subscribe or Not?
The public offering, according to the LIC DRHP (Draft Red Herring Prospectus), is entirely an offer for sale, with the government selling a 5 percent…
-
10 Jun, 2021
10 min read
Tax Exemptions in India: Simplified
The Income Tax Act, 1961 provides numerous exemptions to taxpayers under sections 80C to 80U of the Act.
-
27 Oct, 2021
7 min read
Investors Walk Away from ViacomCBS Stock
Shares of ViacomCBS Inc. have been in the news recently for all reasons. It can be helpful for investors to understand what’s happening with this sto…
-
03 Jul, 2022
5 min read
Invest in Inflation: 5 Ways to Invest...
Understand inflation’s meaning and what assets to invest in that are protected against it.
-
01 Aug, 2021
9 min read
Why companies are choosing the IPO route
You're hearing about all of these upcoming IPOs from brands that you know of and probably also use - Zomato, where you place your food orders; Paytm …
-
09 Mar, 2022
8 min read
Understanding Different Types of Stocks
This article makes clear the varied forms of stocks available in the stock markets today.
-
07 Aug, 2023
3 min read
Interview with Prateek Jain, CFO, Nippon...
Over the past few years, we have been on a relentless journey of building a user-centric digital ecosystem that is not just frictionless, but also fr…
-
30 Jun, 2021
9 min read
Things to know before Investing in any IPO
IPOs are exciting to stock market investors in the same way that a big-ticket film release is exciting to the general population.
-
10 Apr, 2023
3 min read
K-Shaped Recovery: Definition, What It...
When different communities recover from a recession at varying rates, this is known as a K-shaped recovery.
-
25 Oct, 2021
6 min read
Blue Chips Fuel Record
Blue-chip firms are noted for weathering economic downturns and operating financially in the face of adversity, which contributes to their long track…
-
11 May, 2022
8 min read
Top 7 Types of Investment Strategies in 2022
Take a look at the investment strategies provided below such that you can grow your wealth in 2022.
-
02 Jun, 2021
8 min read
Crypto, The Volatility Hook, FOMO, and...
The democratization of the internet and access to world news has been a game-changer in how people choose to invest their money.
-
13 Feb, 2023
None min read
Warren Buffett's Investment Portfolio:...
Explore Warren Buffett's portfolio and learn how he became the world's sixth richest person. Follow his buy-and-hold investment strategy and discover…
-
29 Jun, 2021
9 min read
How to make money in the Stock Market in 2021?
The idea of investing is to enable your capital to grow. In fact, capital growth is in the very definition of the verb “to invest”.
-
13 May, 2021
9 min read
What EV stocks are available and should...
EV stocks or stocks related to electric vehicles (hence the acronym EV) becoming increasingly popular as the world becomes more conscious of its carb…
-
12 Jun, 2023
3 min read
Interview with Mohit Saboo, Director and...
We are exploring opportunities for the export of AAC Blocks and have the vision to achieve a leadership position in the AAC block space in India, aff…
-
08 Oct, 2021
7 min read
Exploring top Retirement Savings Strategies
Saving for retirement is a smart financial strategy for anyone, whether they are 25 or 55. Here are the best strategies for retirement savings that w…
-
28 Mar, 2021
7 min read
Fund of Funds: Should these be in your portfolio
Imagine that you wanted to install a new switch board in your room when the work from home craze started after the lockdowns.
-
08 Mar, 2021
8 min read
Raghuram Rajan's polarizing stance on Bitcoin
Bitcoin has been in news ever since its inception around the global financial crisis of 2008, but this year, bitcoin hasn’t only been in news.
-
01 Feb, 2022
6 min read
Top 5 IPOs of 2021
Here's a rundown of the top IPOs in 2021. Continue reading to know more about it!.
-
30 Nov, 2021
8 min read
10 Ways to Profit in a Bear Market
A bear market need not be the worst thing if you have a couple of tricks up your sleeve. Here are a bunch of strategies that call for varying levels …
-
23 Jan, 2023
None min read
Know About Hindsight Bias
Want to know a secret mistake that all of us make but do not realise? Hindsight bias is a folly that makes people waste their money, time and effort …
-
31 May, 2021
8 min read
A throwback to the biggest rises and...
There are countless proverbs that are employed to offer caution and comfort to stock market investors: This includes “what goes up, must come down” …
-
10 May, 2021
8 min read
How do IPOs help economic recovery?
IPOs are an exciting investment opportunity for experienced and amateur investors and also a key ingredient in the cocktail that it takes to enable e…
-
31 May, 2023
3 min read
Interview with V. Srinivasan, Executive...
While the general market landscape continues to be soft, we continue to see growth opportunities for our products globally, believes V. Srinivasan, E…
-
18 Feb, 2022
7 min read
LIC IPO: Benefits for Policyholders
All policyholders must ensure that their PAN data are updated in their policy records in order to be regarded as an eligible policyholder for the nex…
-
28 Jun, 2023
3 min read
Interview with Keshav Bhajanka Executive...
We have expanded our capacity and we are going into the laminate segment as well where we are expanding our capacity, assures Keshav Bhajanka, Execut…
-
07 May, 2021
8 min read
Shadow investing - how reliable is it?
If your tyre went bust on the roadside, and you had all the material to repair your tyre, but no idea about how to do it, what would you do?
-
05 May, 2021
7 min read
Understanding the impact of COVID 2.0 on...
When the COVID pandemic struck India last year, Sensex plunged from the 45,000+ levels right to sub-30,000 levels within a matter of five weeks.
-
17 Mar, 2022
6 min read
Preference Shares: Meaning, Types and Advantages
This article helps shed light on all that preferred stock entails including its definition, types, advantages and disadvantages.
-
21 Aug, 2021
8 min read
Margin Trade Funding (MTF)
Those seeking to invest in the stock market have the opportunity to take advantage of a wide range of financial tools with which they can potentially…
-
05 Jan, 2022
8 min read
5 Stocks to Watch Out for Amid the...
Keep a watch on these stocks once the new Omicron version appears. Read on to know more!
-
19 Mar, 2021
8 min read
Lessons on financial planning from IPL Auctions
Cricket and finance - sounds like polar opposites given the history of betting on each and every move that cricket fanatics in India track on their s…
-
01 Jun, 2023
None min read
Interview with Bimal Thakkar Chairman &...
Our ongoing initiatives, coupled with potential mergers and acquisitions, position us well for sustained value creation in the future, expresses Bima…
-
05 Jun, 2023
4 min read
Interview with Sandeep Sikka, CFO, AGI Greenpac
In addition to consumer trends, the remarkable growth of the e-commerce industry in India also plays a significant role in driving the packaging indu…
-
11 Jul, 2023
4 min read
Interview with Vikas Gupta, Managing...
Our strategies for enhancing our competitive position revolve around innovation, customer-centricity, market expansion, strategic partnerships, and o…
-
22 Aug, 2023
None min read
Interview with Sanjiv Keshri, CFO, Jupiter Wagons
JWL plans on doing a Rs 250 crore capex for FY24 and FY25 to expand all its businesses combined including wagons, brake systems, etc, expresses Sanji…
-
30 Jun, 2023
4 min read
Interview with Sandeep Sikka, Group CFO...
We remain committed to fostering innovation, driven by the ever-changing preferences of our customers, asserts Sandeep Sikka, Group CFO, Hindware Hom…
-
03 Aug, 2022
7 min read
How To Diversify Your Portfolio
Understand how to diversify your portfolio and the benefits associated with this diversification.
-
08 Nov, 2021
7 min read
Paytm IPO
Paytm is one of the biggest fintech platforms in India today, and is one of the latest IPOs in the Indian market. Read on to know more about the Payt…
-
29 May, 2021
8 min read
Over-diversification of your portfolio is...
One of the foremost pieces of risk-management advice given to a stock market investor is: diversify your portfolio.
-
25 Aug, 2023
4 min read
Interview with Sanjay Kumar Agarwal,...
As the Indian steel industry continues to evolve, we are poised to adapt and seize the potential that these changes present, voices Sanjay Kumar Agar…
-
08 Nov, 2021
8 min read
Upcoming IPO in Nov-2021
A number of companies have gone public this year and have successfully launched their IPOs in the market. Read on to find out more about the upcoming…
-
05 Aug, 2022
5 min read
What is a Terminal Value?
If you’ve ever asked yourself “what is terminal value?”, you’ve come to the right place. Understand its definition, scope, and the forms it takes.
-
11 Nov, 2021
8 min read
Is Google a Good Investment?
Some analysts feel that Google is a relatively secure stock to buy both qualitatively and quantitatively. The soundness of Google's balance sheet con…
-
18 Feb, 2022
7 min read
LIC IPO: Expected Date, Price, DRHP
The mammoth LIC IPO might be valued at about Rs 15 trillion. Here's all you need to know about the LIC initial public offering.
-
13 May, 2022
5 min read
Why Gold Rate is Increasing Day by Day?
There are a number of factors contributing to the rising price of gold. This article seeks to shed light on the same.
-
05 Jul, 2022
5 min read
Earnings Before Interest and Taxes (EBTA)
It's difficult to assess your company's financial health. There are a lot of numbers to think about, and they don't always add up. Accountants and fi…
-
09 Jul, 2022
5 min read
Benefits of Holding Stocks for Long Term
Understand the boons associated with long-term investments such that you too can consider availing them.
-
29 Apr, 2022
7 min read
Top 10 Stocks for 2022
Understand what some of the good stocks for 2022 are and learn where you ought to direct your money.
-
03 Dec, 2021
7 min read
IRCTC Stock and Share Split
A beginner investor's guide to stock split, the headline-making IRCTC stock split and its dramatic stock price spike and dip.
-
27 Jun, 2021
8 min read
The buy-and-never-sell type of investor
Broadly, there are two types of participants in the stock market – long-term investors and traders.
-
29 Jun, 2022
5 min read
Top 5 Best Trading Technical Indicators
Understanding the fundamentals of technical trading indicators may be quite beneficial if you monitor stock market activity on a regular basis. One m…
-
14 May, 2021
9 min read
Exploring the Telecom Sector as an...
Investing and trading on the Indian stock markets has the potential to bring in large returns.
-
10 Mar, 2022
7 min read
Russia vs Ukraine War: Impact On Indian...
The markets have reacted adversely to the Russia vs Ukraine war. Understand how the Indian stock market has been impacted.
-
26 Jun, 2021
9 min read
Warren Buffett's Portfolio 2021: Top 5...
When it comes to investing, the seasoned trader and the novice alike look up to the holy grail of investors - Warren Buffett.
-
31 Aug, 2023
10 min read
Interview with Shashidhar SK, CFO of...
We are poised to continue this upward trajectory in the upcoming quarters, leveraging our strengthened client base and fortified industry positioning…
-
29 Jul, 2022
5 min read
Buy and Sell Strategy
Understand the merits associated with the “buy low, sell high” adage and determine whether or not it is actually easy to implement this buy and sell …
-
16 May, 2021
7 min read
Is it Possible to Identify Moat Stocks?...
The impregnability of a fortress is defined by the effectiveness of its battlements, moats, barbican, towers, turrets and portcullis.
-
20 Jun, 2023
3 min read
Interview with Gandharv Tongia Executive...
Company is committed to staying ahead of market trends, delivering superior products and services, and creating long-term value for stakeholders, sta…
-
26 Mar, 2021
8 min read
A closer look at the Blue Economic Policy
You might have heard about the Blue Economic Policy in the news. Have you been wondering what it is all about, and what the implications will be for …
-
11 May, 2021
7 min read
The most expensive shares in India
The stock market has something to offer for everyone who is looking to invest. Some stocks can cost you a few hundred rupees, while others might be s…
-
16 Jun, 2021
8 min read
All you need to know about term insurance
Insurance is one of the oldest forms of investment that exists on the investment landscape and as such you have definitely heard about it.
Ready To Trade? Start with
Subscribe to #SmartSauda Newsletter
CONTINUE WITH GOOGLE
CONTINUE WITH FACEBOOK
