ESG Funds in India: Mixed Results, Inconsistent Ratings, Thematic Only

• ESG mutual funds select companies based on environmental, social, and governance standards, aiming for ethical and resilient portfolios.
• Challenges in India include inconsistent ESG ratings due to varying methodologies and evolving disclosure standards, which regulators are addressing.
• Performance of ESG funds has varied across market cycles, sometimes lagging when cyclical or carbon-intensive sectors rally.
• ESG funds are recommended as a small, thematic allocation (5-10%) for investors who value the philosophy, not as a primary equity holding.

Why It Matters: It helps investors decide if ESG funds suit their portfolio despite evolving challenges.