Kolkata: Millennials are looking at newer investment options like ESG (environmental, social and governance) funds, cryptocurrencies and international equities to grow their assets, unlike the older generation. FY25 may see a surge in these investment areas as more ESG funds are being introduced and RBI, too, is planning to launch a digital currency.
Why millennials like ESG funds
The millennials of today are constantly on the lookout for companies that are built on sustainability. They yearn to understand the different aspects that contribute to the stability and continuity of the companies that they invest in. There is a greater demand for businesses that survive the severe impacts of any crisis and constantly incorporate ESG factors within their daily functioning. ESG investing can also be called sustainable investing. Market sources indicate that the investment in ESG-themed funds will attract more millennials in FY 25.
In India many fund houses have launched ESG-focused equity schemes--both managed actively as well as passively--assets worth Rs 10,946 crore are managed by 10 ESG schemes across fund houses. The ESG framework is evolving and influences the quality of a business over the medium to long term. Hence in most cases, long-term investors invest in these schemes to their advantage. ESG investing is also called sustainable investing.
Post the COVID pandemic, the ESG theme has gained traction, and the future looks bright for the theme. Indians are starting to look for sustainable alternatives for numerous reasons. Strict regulatory constraints have pushed companies to be more ESG compliant. In reality, companies have shut down, failing to comply with the rules. As a result, most companies have started being more ESG compliant, seeing the fate of the failed companies. Apart from regulatory obligations, the interest of foreign investors is another factor that is encouraging companies to take ESG norms more seriously. Companies that are sustainable and ESG compliant are gaining the attention of foreign investors as well.
The way forward for ESG investment
While corporations have embraced ESG at multiple levels, primarily with the motive of garnering investments, the investors’ evaluation of ESG remains blurry, due to a lack of concrete and objective parameters assessing ESG compliance. Harmonisation of ESG regulation with specific exceptions concerning varied geographical, geo-political, regional, legal, regulatory, and cultural variations appears a viable solution. There is a huge inter-jurisdictional information asymmetry data void that needs to be resolved as the primary step.
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