ESG Mutual Funds

ESG Mutual Funds offer a unique way to invest in companies that prioritise environmental sustainability, social responsibility, and strong governance. While some investors gravitate towards equity or debt mutual funds, ESG funds allow you to invest in companies that align with your values and make a positive impact on the world. These funds carefully select companies that demonstrate a commitment to environmental conservation, social justice, and ethical governance practices, giving you the opportunity to grow your money while supporting businesses that are dedicated to making a difference. Let's learn more about this types of mutual fund.

Best ESG Mutual Funds

List of the top-performing ESG Mutual Funds sorted by returns with their AUM and Expense Ratio.

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10 Mutual Funds
5Y return

What are ESG Mutual Funds?

ESG's full form is Environmental, Social, and Governance. These mutual funds invest in companies that meet specific criteria in these areas.

Environmental: Considers a company's impact on the environment, including carbon emissions and waste management.

Social: Focuses on employee welfare, gender equality, and contributions to social causes.

Governance: Emphasizes regulatory compliance, ethical conduct, and strong internal controls.

New and evolving: ESG funds in India are relatively new and may not have a long-term track record.

Consider personal goals and risk: Investors should carefully evaluate their individual investment goals and risk tolerance before investing in ESG funds.

It offers you a way to invest in companies that are committed to sustainable practices and positive societal impact. 

How ESG Mutual Funds Work?

ESG mutual funds work by incorporating ESG criteria into their investment selection and management processes. Here’s a breakdown of how they typically operate:

ESG Screening: Fund managers use ESG criteria to screen potential investments. This involves evaluating companies based on their environmental impact, social practices, and governance structures. Companies that meet the fund’s ESG standards are included, while those that do not are excluded.

Integration and Analysis: ESG factors are integrated into financial analysis. Fund managers assess how ESG issues may impact a company’s long-term performance and sustainability. This may involve qualitative and quantitative analysis of ESG data alongside traditional financial metrics.

Investment Selection: Based on the ESG analysis, the fund selects investments that align with its criteria. This can involve choosing companies with strong ESG practices or those that are making positive strides in addressing ESG challenges.

Active Management: Many ESG funds are actively managed, meaning fund managers continuously monitor and adjust the portfolio to ensure alignment with ESG goals and to respond to changing market conditions.

Reporting and Transparency: ESG funds often provide detailed reports on their ESG performance, including how investments meet ESG criteria and the impact of the fund’s investments on societal and environmental issues.

Aditya Birla Sun Life ESG Integration Strategy Fund Direct Growth Leads AUM Growth in the Equity Esg Category

In the past six months, the Aditya Birla Sun Life ESG Integration Strategy Fund Direct Growth has emerged as the leader in AUM growth, witnessing an impressive addition of ₹-122.79 crore. This positions it as one of the top-performing Equity Esg mutual funds in terms of investor interest and fund growth.

Zomato Ltd added by 3 Equity Esg Mutual Funds

Over the last six months, 3 Equity Esg Mutual Funds have added Zomato Ltd to their portfolio. This move highlights the stock’s growing appeal in the segment as a promising investment.

Nestle India Ltd Sees Exit from 2 Equity Esg Mutual Funds

In contrast, Nestle India Ltd has been exited by 2 of 10 Equity Esg Mutual Funds in the last six months. This shift underscores a cautious approach by fund managers toward the stock, reflecting changing market dynamics.

Financial Services Sector tops in Equity Esg Funds

Over the last 6 months, Equity Esg category has seen increased allocation towards Real Estate, Communication, Energy sectors and allocation in Utilities, Industrial, Tech sectors has decreased

Sectoral allocation of Equity Esg Funds
As of 30 Mar 2025
Sector
AUM
Financial Services
Financial Services

Decreased by 1.41%, in last 6M

3.37K Cr
Consumer Cyclical
Consumer Cyclical

Decreased by 20.89%, in last 6M

1.62K Cr
Tech
Tech

Decreased by 25.53%, in last 6M

1.56K Cr
Industrial
Industrial

Decreased by 30.15%, in last 6M

977.53 Cr
Health
Health

Decreased by 24.31%, in last 6M

573.09 Cr
Basic Materials
Basic Materials

Decreased by 22.17%, in last 6M

528.68 Cr
Consumer Defensive
Consumer Defensive

Decreased by 22.13%, in last 6M

434.6 Cr
Communication
Communication

Increased by 7.75%, in last 6M

356.21 Cr
Energy
Energy

Increased by 7.22%, in last 6M

260.75 Cr
Utilities
Utilities

Decreased by 30.48%, in last 6M

241.43 Cr
Real Estate
Real Estate

Increased by 275.45%, in last 6M

70.04 Cr