Role of investment banking and ESG funds in India

Investment banking is a term we are all familiar with. From time to time, we must have read this term in the newspapers, heard on news channels or simply must have heard on some TV show. But what exactly is investment banking? Investment banking, in simple terms is the process of raising funds and capital for clients that can either be big corporates or government sector institutions, and some other entities too. Their primary functions include aiding their clients in underwriting new debt, selling securities and also help in facilitating mergers and acquisitions. Along with this, they are also involved in reorganizations for private sector investors and some institutions as well. Another very important function of the investment banks is helping and guiding firms (the bigger ones) with investment in ESG funds in India, or wherever they might be. ESG funds are the kind of funds that tells potential investors about a company’s position and credibility through their investments in environmental, social and governance factors. The major focus is on those businesses that resort to having environment-friendly conduct, deliver services or products that have a positive impact on the society and give a great importance to ethical business conduct.

So why exactly is ESG funds in India or anywhere else important today? To put it in simpler words, it is a belief that companies would invest in ESG only when there is some pressure from bigger and larger investors, who have the power to hold them accountable for their environmental, social and governance ethics. Plus, we cannot rule out the fact that in today’s world, any business that could potentially harm the climate, societal beliefs, and governance conduct can be a greater risk for any business and hence, the investors too. Those companies that follow the ESG guidelines and norm are always in safe zone in terms of losses with reference to the above-mentioned factors.