ESG Funds in India: Should You Invest in 2025?

• ESG mutual funds in India invest based on Environmental, Social, and Governance factors, introduced in 2018-19.
• SEBI mandates 80% of capital in ESG funds must be invested in the ESG segment.
• Concerns exist regarding inconsistent ESG ratings, evolving regulations, and limited company disclosures in India.
• Performance of ESG funds is tied to market trends, sometimes lagging when non-ESG sectors outperform.
• ESG funds suit investors prioritizing ethical practices and can be used for diversification (5-10% of equity portfolio), not as a primary investment.

Why It Matters: It guides Indian investors on ESG fund suitability and risks for 2025.