AvendusIndia ESG Fund- India’s First responsible investment fund
AvendusIndia ESG Fund has become the first ESG (Environmental, Social and Governance) Fund launched in India. Among the emerging Asia countries, India was the only country not having any ESG fund. The ESG fund is launched by the alternate asset management arm of Avendus Capital with the aim of providing investors an instrument to invest sustainably and responsibly. It is estimated that 26 per cent of total assets amounting to $22.9 trillion across the world is managed under Sustainable Responsible Investing.
Investment strategy of AvendusIndia ESG Fund
The fund was announced in August 2018, but has started investments only from February 1, 2019. AvendusIndia ESG Fund is an open ended, long only fund coming under Category III Alternate Investment Fund (AIF). The fund aims to have a portfolio of around 20 stocks selected from Nifty 100 companies based on ESG score and fundamental strengths. Avendus aims to have a corpus of USD 1 billion, together from both onshore and offshore. 30% of AvendusIndia ESG Fund is expected to be mobilized from domestic market. For ESG ranking, AvendusIndia ESG Fund will be depending on the ranking provided by Institutional Investor Advisory Services (IiAS). Based on the IiAS ESG ranking, Avendus will zoom on the top ranked 50 companies. These companies will be subjected to fundamental analysis by Avendus for finalizing the investible companies. AvendusIndia ESG Fund will concentrate on bottom-up stock strategy for value picking to have long term value creation.
Institutional Investor Advisory Services (IiAS)
Institutional Investor Advisory Services (IiAS) is a SEBI registered independent advisory firm and research entity. It has put in place an ESG ranking framework to rank various companies based on ESG principle. IiAS is an advisory firm engaged in providing unbiased independent opinions, research and data on corporate governance issues for participants in Indian stock market. They have developed an Indian Corporate Governance Scorecard in a joint initiative with the International Finance Corporation (IFC) and Bombay Stock Exchange (BSE).
IiAS has equity participation from leading banks, rating agencies, insurance companies and mutual fund houses. Shareholders include Axis Bank, Yes Bank, Kotak Mahindra Bank, HDFC,Fitch Group Inc., ICICI Prudential Life Insurance, Tata Investment Corporation and UTI Asset Management Company Limited. The three parameters governing ESG criteria, environmental, social and governance have different weightage in the ESG rating model designed by IiAS, with governance getting maximum weightage. It may be noted that in a study conducted by NSE recently, it was pointed out that companies that follow good corporate governance practices command premium valuation.
Trends in global ESG portfolio
The investments under ESG portfolio are growing at a rapid pace world over. The corpus under ESG portfolio has doubled during the last six years. At present 26 % of total assets globally are managed under ESG portfolio. Globally, investors are moving towards Sustainable Responsible Investing, whereas India was lacking an ESG portfolio. AvendusIndia ESG Fund expects to fill the void and expect to repeat the story in India too.
