The India Mutual Fund Industry Size is projected to expand significantly, with assets under management (AUM) expected to rise from USD 0.66 trillion in 2024 to USD 1.51 trillion by 2029. This growth corresponds to a compound annual growth rate (CAGR) of over 18% throughout the forecast period from 2024 to 2029.

Environmental, Social, and Governance (ESG) investing has gained significant traction in India, reflecting a global shift towards sustainable investment practices. As investors become increasingly conscious of the impact of their investments on society and the environment, ESG funds are emerging as a prominent vehicle for promoting sustainability in the financial landscape.

Key Trends

  1. Growing Investor Awareness: There is a marked increase in awareness among Indian investors about the importance of sustainable investing. Factors such as climate change, social justice, and corporate governance are now influencing investment decisions. Research indicates that millennials and Gen Z are particularly inclined towards ESG-oriented investments port. The Indian government and regulatory bodies, such as the Securities and Exchange Board of India (SEBI), are actively promoting ESG investments through guidelines and incentives. SEBI's introduction of the Business Responsibility and Sustainability Report (BRSR) aims to enhance transparency and encourage companies to adopt sustainable practices.
  2. Due to the belief that sustainable funds may underperform, many ESG funds in India have demonstrated competitive returns compared to traditional funds. This has attracted more investors, as they seek both financial returns and positive societal impact.
  3. Diverse Offerings: The variety of the Indian market is expanding. Fund houses are increasingly launching thematic funds focused on specific ESG criteria, allowing investors to align their portfolios with their values. This includes funds targeting renewable energy, sustainable agriculture, and social impact.
  4. Increased Institutional Interest: Institutional Investore increasingly allocating funds to ESG strategies. This trend is driven by a growing recognition of the long-term financial benefits associated with sustainable investing, as well as the reputational advantages of being seen as socially responsible.

Conclusion

The rise of ESG funds in India represents a transformation landscape, emphasizing the integration of sustainability into financial decision-making. As awareness grows and regulatory frameworks evolve, the ESG investment space is expected to expand significantly. This not only presents an opportunity for investors to achieve competitive returns but also fosters a broader commitment to sustainable development in the country. The coming years will likely see continued growth in ESG investments, reflecting a collective shift towards a more responsible and impactful approach to investing.

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