Aditya Birla Sun Life ESG Fund NFO – Should you Invest?
There is a flood of ESG mutual funds in the last couple of months. Aditya Birla Sun Life MF is planning to launch ESG Fund now that would open for subscription on 4th December, 2020. Aditya Birla Sun Life ESG Fund invests based on Environmental, Social and Governance criteria. ESG is gaining ground with increase in total assets under social-responsibility investment. Should you invest in the Aditya Birla Sun Life ESG Fund NFO? Would ESG funds create wealth in the medium to long term?
What is ESG theme?
You can skip this section if you are already familiar about ESG theme.
ESG represents factors viz. Environmental (such as impact of business on natural resources), Social (such as a business, having undesirable social of the scheme impact) and Governance (being the way in which the company is run). Quality companies with a competitive advantage, sustainable business model and visibility of earnings growth are the best avenues for long term wealth generation. ESG factors can complement traditional tools for evaluating and identifying quality businesses and thus improve the overall understanding of the company.
Typically, it is seen that the companies that have strong ESG metrics are companies that are well governed and treat their responsibilities to the environment and society seriously and as a result are likely to avoid negative external shocks that can impact their business models.
Aditya Birla Sun Life ESG Fund NFO – Issue Details
This is an open-ended mutual fund. Here are the NFO issue details.
|Aditya Birla Sun Life ESG Fund – NFO Issue Details|
|Scheme reopens for continous purchase/sale||Within 5 days from closure of NFO|
|Minimum investment (Lumpsump)||Rs 500|
|Minimum investment (SIP)||Rs 500 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||1% < 90 days|
|Max Total expense Ratio (TER)||2.25%|
|Benchmark||Nifty 100 ESG Index TRI|
|Fund Manager||Mr. Satyabrata Mohanty
Mr. Vinod Bhat (Overseas investments)
Aditya Birla Sun Life ESG Fund NFO – Investment Objectives
To generate long-term capital appreciation by investing in a diversified basket of companies following Environmental, Social and Governance (ESG) theme.
However, there can be no assurance that the investment objective of the scheme will be achieved.
What is the allocation pattern in this mutual fund scheme?
|Type of instruments||Min %||Max %||Risk Profile|
|Equity & Equity related instruments of companies following the Environment, Social & Governance (ESG) theme||80%||100%||High|
|Other equity and equity related instruments||0%||20%||High|
|Debt & Money Market Instruments||0%||20%||Low to medium|
|Units issued by REITs & InvITs||0%||10%||Medium to High|
Can NRI invest in this MF scheme?
Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis. However, Resident of Canada, US persons and OCBs cannot invest in this scheme.
Also Read: Best Pharma Mutual funds to invest now
Why should you invest in Aditya Birla Sun Life ESG Fund NFO?
Here are a few reasons to invest in such schemes.
1) It is a unique mutual fund scheme that invests based on ESG theme.
2) ESG theme has already gained prominence across the world and is gaining confidence in India too. Investors are moving to invest in ESG compliant companies where there could be less fraud / scams / companies that do not harm the environment.
3) There has been strong research evidence of ESG investing delivering superior returns since companies with strong sustainability scores demonstrate better operational performance and are less risky.
Major risk factors you should consider before investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) This ESG criteria is new in India. A mutual fund may or may not gain from such new strategies in the short term.
2) Stocks that meet ESG criteria might be expensive. In such case the fund might pay higher share prices, but in reality the real worth could be low.
3) It invests up to 20% in debt instruments where there are interest rate risks and default risks. It also invests up to 10% in InvITS and REITs, which are high risk.
4) Fund may invest up to 50% in derivatives for the purpose of hedging which are high risk.
5) It invests in foreign securities where there is country specific risks and foreign exchange currency risks.
6) Investors should read the NFO prospectus for complete risk factors.
How is the Performance of ESG Mutual Funds in India?
Currently there are few funds in this ESG segment. Let us look at the performance of these existing ESG funds.
|Fund Name||6 month||Annualized Returns|
|1 Year||3 Year||5 Year|
|SBI Magnum Equity ESG Fund||42.5%||8.8%||9.0%||11.2%|
|Quantum India ESG Equity Fund||44.8%||20.1%||NA||NA|
|Axis ESG Equity Fund||37.4%||NA||NA||NA|
Should you invest in the Aditya Birla Sun Life ESG Fund NFO?
While ESG concept is relatively new to India, it is gaining prominence in the recent times. Investors are now focussing on investing in companies that meets ESG criteria which could be a relatively safer bet. High risk investors can invest in such schemes. If you do not want to test new funds, you can invest in some of the existing ESG mutual funds that had already proven its performance. Moderate to low risk investors should stay away from such funds as such MFs invests based on ESG theme which is specific to a set of companies.
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