ESG Investing- A Fad or Future of Finance

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Apurva Dhamankar

1/28/20242 min read

Businesses and financial organizations are faced with a decision between responsibility and opportunity. They are in a unique position to direct and affect the direction of global solutions. Their choices, the laws they enact, and the tactics they employ have the potential to reverberate much beyond their immediate area of influence. The future of ESG investment is directed by the combination of governments that are now willing to take concrete steps to battle climate change and the enormous amount of private wealth that is required to confront this challenge that defines our period.

This is where investment in ESG (Environmental, Social, and Governance) matters. ESG investment provides a ray of hope by emphasizing these three vital factors. It is more important to create real, constructive change on a global scale than it is to merely maximize profits or minimize dangers. Investors can assist organizations that are not only proactive problem solvers but also active observers of the urgent issues of our day by allocating funds to companies that place a high priority on ESG principles. Through ESG investing, we have the power to steer our collective future toward a more sustainable, equitable, and prosperous horizon.

ESG investments are more towards long-term sustainable growth and the companies that prefer ESG factors are more innovative and efficient with less legal and reputational risks, proving to be more financially stable.

Talking about India’s contribution towards ESG, being its G20 agenda, Sebi has introduced the BRSR score framework with 9 nine major ESG attributes to guide disclosures. In its most recent Master circular, Sebi also issued rules that will promote advancement in the second hemisphere of an ESG-conscious ecosystem by establishing a common basis and contextual evaluation metrics.

The investment tenets that have made Yngve Slyngstad and Mark Mobius well-known are ESG elements, which can assist businesses in reducing risk, lowering volatility, and generating more reliable returns by bringing them into line with larger social objectives. Additionally, they said that businesses with robust environmental policies were better suited to deal with upcoming environmental laws and adapt to shifting consumer preferences.

On the other hand, the ESG frenzy on Wall Street is subsiding. This is a result of investors cashing out billions due to the unsatisfactory returns. The political marketization of environmental, social, and corporate governance investing can be attributed to governmental supervision, increased interest rates, and the resulting reaction. All of this occurred as a result of the lower-than-anticipated demand for ESG investing among financial advisors who interact with retirement plan participants. Additionally, because they think it would improve the strategy in the long run, the Securities and Exchange Commission is creating more ESG funds.


Thank you.

Regards,

Devansh Sheth,

Kautilya, IBS Mumbai.

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