ESG-Labelled Mutual Funds in India: Performance, Investor Flows and Market Implications

Since 2018, the sharp rise in ESG funds in India has left a huge gap which needs to be researched urgently. The total global ESG assets under management crossed US$ 35 trillion in 2020. While ESG has become mainstream in the global mutual fund industry, in India, it has taken more than a decade for ESG assets under management (AUM) to cross Rs. 25000 crores in 2023. Any empirical investigation of Indian ESG funds is negligible in the emerging academic literature. The authors analyze the financial performance and the environmental, social and governance performance of ESG mutual funds in India. We analyze research published in reputed international and India-specific journals to identify five key gaps in existing literature. Empirical studies were taken into consideration to come up with the 4 hypotheses that are testable in nature. Our hypotheses state the following: H1 risk-adjusted performance of ESG vs conventional funds; H2 investor flow sensitivity to ESG rating and controversy; H3 greenwashing effect through portfolio characteristic comparison; and H4 the impact of ESG on market pricing. We suggest a multi-method secondary data analysis plan post-2018-23 for the ESG-labeled equity mutual funds active in the Indian market.