Why Is ESG Fund Important to A Business?

ESG funds in India is an emerging concept which is slowly paving its way into the investment mandate of big corporations. It might not be a compulsion on all the big industry players yet, but it certainly has become a silent need for any business to invest into ESG fund, so that they can be on the good will side of their traders, customers and other investors. Investment banking corporations providing financial advisory services generally advice in favour of these funds. With ESG, potential investors understand the management quality, corporate purpose and strategy of a particular business.

ESG funds in India or elsewhere in the world may not have direct impact on financial performance but will have deep impact on financial relevance of the firm. They cover issues and facts in broad spectrum that might not be a part of the financial analysis (by investors) traditionally, but do certainly matter when it comes to investing in the same company.

ESG (the Environmental, Social and Governance) funds are not to be confused with CSR (Corporate Social Responsibility). While CSR is more about the corporates giving it back to the society through good deeds and charity, ESG funds is more about the internal matters and what the bigger companies are doing about them. It really matters whether or not the employees of the firm are faring well and are getting fair compensation, if the produce or service of the company is doing any harm to the environment, or how the company is contributing to the betterment of it and whether or not the relationship between the firm and suppliers, buyers, investors etc are taken care of, and also, whether all the proceedings of the firm are legal.

This is important today for the firms to maintain a good image in front of the world, ensuring it that they believe in betterment of the society as a whole.