Sustainable Investing in India: An Analysis of ESG Mutual Fund Performance

Shikha Dua; Pratham

Abstract

The importance of investing in ESG funds has grown significantly over time as investors increasingly prioritize sustainability alongside financial returns. ESG investments not only promote corporate responsibility but also mitigate long-term risks associated with environmental, social, and governance factors. This study analyzes the performance of 36 ESG mutual funds in India using key risk-adjusted metrics such as the Sharpe Ratio, Treynor Ratio, and Jensen Alpha. The findings highlight Quant Direct Growth and Quant Regular Growth as consistent top performers across all metrics, offering superior risk-adjusted returns and showcasing their potential as robust investment options. Funds like ICICI Direct and Invesco Direct Plan Growth also rank prominently, further emphasizing their suitability for ESG-focused portfolios. While most funds demonstrate stability in returns, some exhibit higher variability and risks, necessitating careful assessment by investors. The analysis underscores the growing relevance of ESG criteria in investment decisions, aligning financial performance with sustainability goals. By prioritizing funds with consistent and strong risk-adjusted returns, investors can achieve both financial and ethical objectives, navigating the evolving landscape of socially responsible investing in India.