Sustainable Investing in India: The Top 3 Key Drivers in 2022
Vivek Suman
Managing Partner at M&A Experts Advisory | ESGrisk.ai Committee Member | Investment Banking | Podcast Guest | Mentor to Startups | Advisory Board Member
Ahead of the 27th Conference of the Parties of the UNFCCC (COP27) in Sharm El-Sheikh, it is imperative to discuss how sustainable investing is gaining traction in India. Based on the Benori Knowledge Report 2022, the dry power in this segment is clamoring to fill the gap between the world average Asset Under Management (AUMs) of 36% and India Investment of 10-15%.
Three Key Drivers of Sustainable Investing in India:
1. Demand for socially responsible brand behavior among consumers
2. Government Policies in light of COP15 and COP26 commitments
3. The cleantech and green initiative sector in India has experienced massive growth.
Sustainable investing in India is an investment strategy that considers environmental, social and governance (ESG) factors in addition to financial factors when making investment decisions. The goal of sustainable investing is to generate long-term financial returns while promoting positive ESG outcomes. Sustainable investing in India has been gaining popularity in recent years as more investors are looking to align their investments with their values. Asset managers have responded by launching a number of sustainable investment products.
As of June 2019, there were over 50 sustainable mutual funds and ETFs available in India. The majority of sustainable funds in India focus on domestic companies, with a few funds investing in global companies with a positive ESG profile. In terms of asset class, equity funds are the most popular type of sustainable fund, followed by debt funds.
Sustainable investing in India is still in its early stages and is expected to grow significantly in the coming years. The Indian government has been supportive of sustainable investing and has taken a number of steps to promote it. In Budget 2019, the government announced a number of measures to encourage responsible investing, including setting up a Rs. 100 crore funds to support ESG-focused investment research.
A sustainable investment in India would be one that aims to improve the country's environmental and social conditions while also generating financial returns. Possible investments in this area could include renewable energy projects, green infrastructure, and affordable housing.
The rise in sustainable investing in India has been nothing short of meteoric in recent years. Between 2016 and 2018, India's sustainable investment market grew by 34% to $11.6 billion, according to a study by the Global Sustainable Investment Alliance. Additionally, a report by Benori Knowledge, predicted that Indian PE and VC firms would invest $125 billion in sustainable projects by 2026, at a CAGR of 46%.
Growth Drivers 2022 : UN PRI influence on Indian ESG Investment
This growth is being driven by a number of factors, including an increase in awareness of the issues surrounding climate change and environmental sustainability, the growing importance of the United Nations Sustainable Development Goals, and a general increase in interest in responsible investing. There are a number of reasons to believe that this growth will continue in the coming years.
First, the Indian government has made sustainability a key priority, with Prime Minister Narendra Modi committing the country to meeting its Paris Agreement climate goals and launching the International Solar Alliance, a coalition of over 120 countries committed to increasing solar energy use.
Second, a number of major Indian companies have made commitments to sustainable practices, including the Aditya Birla Group, which has pledged to achieve carbon neutrality by 2040, and Hindustan Unilever, which has committed to sourcing all of its agricultural raw materials sustainably by 2020.
Finally, a number of Indian financial institutions, such as the State Bank of India and the Infrastructure Development Finance Company, have launched sustainable finance products and services