The rise of sustainable finance: ESG investing explained

40 trillion dollars. That’s nearly 10 times India’s current GDP. And that’s also the amount expected to flow into ESG investments by 2030.

So why are investors moving such massive sums, and what does it mean for your money? It all comes down to three letters: ESG.

What is ESG Investing?

ESG stands for Environmental, Social, and Governance - three key factors that go beyond profits to assess how responsibly a company operates.

• Environmental: Measures a company’s impact on the planet, including carbon footprint, clean energy usage, and sustainability practices.
• Social: Evaluates how businesses treat employees, communities, and other stakeholders.
• Governance: Focuses on leadership quality, ethics, and accountability in decision-making.

Put simply, ESG investing means choosing companies that balance profit with responsibility.

The Debate

Supporters vs Critics Proponents argue that ESG-focused companies tend to be more resilient in the long run, potentially offering more stable returns. Critics, including Warren Buffett, caution investors not to rely solely on ESG scores, suggesting traditional metrics like revenue and cash flow remain key.

Global and Indian ESG Trends Globally, Europe is leading ESG adoption, while India is catching up quickly. With SEBI mandating ESG disclosures and younger investors increasingly prioritizing responsible investing, ESG funds are gaining traction in the Indian market.

Popular ESG Funds in India Several ESG funds are already delivering competitive returns in India, including:

• SBI Magnum ESG Fund
• ICICI ESG Fund
• Kotak ESG Opportunities Fund

Is ESG Investing Right for You? ESG investing isn’t a side trend anymore—it’s a growing wave in global finance. The question for investors is simple: will your portfolio ride it, or miss it?