ESG investment funds

Why in news?

• Demand for ESG investment funds are growing in India.

About ESG:

• ESG investing is used synonymously with sustainable investing or socially responsible investing.
• While selecting a stock for investment, the ESG fund shortlists companies that score high on environment, social responsibility and corporate governance, and then looks into financial factors.
• So, the schemes focuses on companies with environment-friendly practices, ethical business practices and an employee-friendly record.
• There are over 3,300 ESG funds globally and the number has tripled over the last decade. The value of assets applying ESG to investment decisions today is $40.5 trillion.
• SBI was the first to create an ESG fund in India. ICICI Prudential, Kotak Mahindra etc too have begun to launch such products.
• As ESG funds gain momentum companies will be forced to follow better governance, ethical practices, environment-friendly measures and social responsibility.

PRELIMS QUESTION

Consider the following statements regarding ESG investment funds:
1.These are investment schemes focusing on environment and ethical practices of companies.
2.ESG funds cannot be created under the current legal norms in India.
Which of the statements given above is/are correct?
(a)1 only
(b)2 only
(c)Both 1 and 2 
(d)Neither 1 nor 2

Answer to prelims question