Evaluating ESG mutual fund financial performance in India: A comparative analysis with conventional equity funds (Chapter 13)

Abstract

Environmental, Social, and Governance (ESG) mutual funds have garnered substantial attention and popularity in recent times. These funds transcend the confines of conventional financial metrics by incorporating environmental, social, and governance factors into their investment decision-making process. ESG criteria serve as a lens through which investors can gauge a company's commitment to sustainability, ethical standards, and long-term resilience. This study endeavours to delve into the financial performance of ESG mutual funds in the Indian context, offering a comprehensive comparative analysis with traditional equity funds. The assessment employs sophisticated risk-adjusted metrics-namely, the Sharpe ratio, Treynor ratio, and Jenson's measure. The study's findings unveil a distinctive aspect: ESG is an emerging paradigm, and currently, these funds exhibit a performance that falls short of both the chosen benchmark and traditional equity mutual funds. By scrutinizing the financial performance of ESG mutual funds and pitting it against the backdrop of traditional equity funds, the study casts light on the latent potential and viability of ESG investing within India's mutual fund landscape. This research offers invaluable insights to investors and brokers alike, empowering them with a nuanced understanding of the flourishing ESG concept and equipping them to make judicious and well-informed decisions.