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Below are Views On The future of sustainable investing - from ESG funds to ESG in funds By Mr. Chaitanya Kalia, India Climate Change and Sustainability Leader, EY India, - Motilal Oswal

ESG – The better way of investing

ESG in India is at a progressive stage

Compared to developed markets, ESG in India is still in its early days. We have spent the past few years in laying the basic groundwork in ESG, which will set us up for the next phases of ESG investing. India is currently at an inflection point and in a progressive stage of ESG implementation.With climate change and global warming emerging as one of the key risks, which the world faces today, ESG has emerged as a better way of investing. Increased shareholder activism and push from the investors and regulators has made ESG ubiquitous in the past few years. This trend is likely to only get stronger going forward.

Some focus areas for asset managers while implementing ESG Integration

* A detailed and thorough review of non-financial information and sustainability reports to evaluate the ESG performance of a company.

* Focusing on the long-term plans and strategy of a company in the Management Discussion and Analysis (MD&A) section and Directors’ report. 

* Focus on the ecosystem in which a business operates, including suppliers and industry peers, offers significant insights into the themes, which will impact the company’s business and overall ESG performance.

Agile and flexible businesses will thrive in the ESG race

Overall ESG implementation will result in greater challenges for companies. They will have to re-evaluate their business models, remodel their corporate strategies, and effectively communicate with stakeholders. Agile and flexible businesses, which effectively work towards overcoming these challenges, are likely to emerge as winners in the ESG race and will reap long-term benefits

Focus on the impact and not just financial return

Over the years, ESG funds have delivered better financial returns and outperformed the broader indices. However, acceptance of sustainability or ESG as a principle and philosophy is what makes ESG investing desirable for an investor. These investors are not driven by financial returns, but the overall impact that their investment makes. Financial performance for them is the by-product of this impact..

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