Environment Social Governance (ESG) investing is synonymous with socially responsible or sustainable investing. ESG investing is an established theme globally but in India this concept is at a very nascent stage.
However, the COVID-19 pandemic has pushed companies/policymakers in India and around the globe to evaluate the impact of their actions on society and the environment. Regulations related to ESG factors are becoming stringent and non-compliant companies are being penalised.
Various companies/sectors are now looking to integrate ESG to improve sustainability and remain attractive to investors. In the future, with increasing awareness among all stakeholders, sectors/companies focused on ESG could attract higher inflows.
Aditya Birla SL Mutual Fund is the latest to launch ESG focused fund viz. Aditya Birla SL ESG Fund. The fund house is of the view that better accountability, corporate governance practices, and a singularly conscious approach towards environment protection has far-reaching positive financial and social consequence/s.
As a thematic fund, Aditya Birla SL ESG Fund has a mandate to invest minimum 80% of its assets in equity & equity related instruments following ESG theme. The performance benchmark index of the fund is Nifty 100 ESG Total Returns Index.
Aditya Birla SL ESG Fund is an open-ended equity scheme that will seek to generate long-term capital appreciation by investing in companies adhering to the ESG theme through a blend of the top-down and bottom-up approaches for portfolio construction. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved.
Table 1: Details of Aditya Birla SL ESG Fund
|Type||An Open ended Equity Schemein companies following Environment, Social & Governance (ESG) theme||Category||Thematic Fund|
|Investment Objective||To generate long-term capital appreciation by investing in a diversified basket of companies following Environmental, Social and Governance (ESG) theme. However, there can be no assurance that the investment objective of the Scheme will be achieved.|
|Min. Investment||Rs 500 and in multiples of Re 1 thereafter||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||
||Benchmark Index||Nifty 100 ESG (Total Returns Index)|
|Issue Opens:||December 04, 2020||Issue Closes:||December 18, 2020|
(Source: Scheme Information Document)
Investment strategy – Aditya Birla SL ESG Fund
Aditya Birla SL ESG Fund will invest in a basket of securities by combining traditional fundamentals, bottom-up financial analysis along with an analysis on the environmental, social, and governance aspects of the company to identify long term sustainable business opportunities. The ESG analysis will be based on internal scores, data shared by external service providers, and index providers.
As a part of the framework to shortlist ESG compliant companies, the companies will be first scored on the 3 pillars of ESG:
- Environmental impact on the planet and resources
- Social responsibility towards customers, employees, investors and the public at large
- Robust, implemented Corporate Governance practices for transparency and stability of management
From this list, the fund will select ESG compliant stocks with high growth potential. Companies may also be considered owing to their strength in any one or two of the above mentioned ESG parameters. ESG screening will be an ongoing process where companies falling below the threshold score will not be considered for investment.
The fund will have a market cap agnostic portfolio with around 60%-80% in large caps and remaining in mid and small caps. It can invest up to 35% of the portfolio in foreign securities.
Under normal circumstances, the fund’s asset allocation pattern will be as under:
Table 2: Asset Allocation of Aditya Birla SL ESG Fund
(% of assets)
|Equity and Equity related instruments of companies following the ESG theme||80||100||High|
|Other Equity and equity related instruments||0||20||High|
|Debt securities and money market instruments (including units of debt & liquid fund schemes)||0||20||Low to Medium|
|Units of REITs & InvITs||0||10||Medium to High|
(Source: Scheme Information Document)
Who will manage Aditya Birla SL ESG Fund?
Mr Satyabrata Mohanty will manage Aditya Birla SL ESG Fund, while Mr Vinod Bhat will be the dedicated manager for overseas investment of the scheme.
Mr Satyabrata Mohanty is the Head – Mixed Assets at Aditya Birla SL Mutual Fund. Mr Mohanty is a CA and a CFA, having over 12 years of experience in Finance and Research. He has been part of the Birla group since last 17 years. He has handled responsibilities across Fund Management (Equity & Debt), Trading and Credit Research functions. Prior to joining BSLAMC, he has worked with Aditya Birla Management Corporation Ltd & joined ABG as a management Trainee.
Mr Vinod Bhat is a Fund Manager at Aditya Birla SL Mutual Fund. Mr Bhat comes with an overall experience of nearly eighteen years with over 12 years in the financial markets and investment banking space. He has been associated with ABSLAMC since July 2018 as Head of Investor Communications (Investments – Equity).
Mr Bhat is a CFA (USA) and has done his MBA in Finance from Wharton University of Pennsylvania (USA). He is an M.S. in Industrial Engineering from Pennsylvania State University (USA) and holds a B.Tech degree in Mechanical Engineering from IIT Bombay.
He currently manages ABSL Global Emerging Opportunities Fund, ABSL Global Real Estate Fund, ABSL Asset Allocator Multi Manager FoF Scheme, ABSL Financial Planning FoF, and ABSL Special Opportunities Fund.
Fund outlook – Aditya Birla SL ESG Fund
Companies that integrate ESG are expected to deliver better risk-adjusted returns in the long term because it reduces risks associated with regulatory and reputational controversies. Further, these companies have sustainable business models that augur well for long-term growth.
ESG investing has the potential to add value for investors’ portfolios as it looks to identify corporations that are sustainable from an environmental, social, governance point of view, apart from financial factors.
Being an actively managed fund, Aditya Birla SL ESG Fund’s performance will depend on its ability to identify stocks that score high on both ESG initiatives and growth prospects at reasonable valuations and to timely eliminate risky businesses.
One should have a high-risk appetite and an investment horizon of 5 years and above before investing Aditya Birla SL ESG Fund.
This article first appeared on PersonalFN here