Aditya
Birla Sun Life ESG mutual fund is a NFO from the house of Aditya Birla Sun Life
Mutual Fund.
It would be
an open equity scheme investing in companies following Environment, Social and
Governance (ESG) theme.
The fund
would be open for subscription from December 4, 2020 to December 18, 2020.
NFO details for Aditya Birla Sun Life ESG Mutual
Fund
|
Scheme Opens |
04/12/2020 |
|
Scheme Closes |
18/12/2020 |
|
Fund Manager |
Mr. Satyabrata Mohanty Mr. Vinod Bhat |
|
Benchmark |
NIFTY 100 ESG TRI |
|
Fund Category |
ESG |
|
Exit Load |
1% if redeemed before 90 days |
Aditya Birla Sun Life ESG Mutual Fund Investment
Objectives
The
investment objective of this esg mutual fund is to generate long term
capital appreciation by investing in companies following Environment, Social
and Governance (ESG) theme.
There is no
guarantee that the investment objective of the fund would be realized.
Aditya Birla Sun Life ESG Mutual Fund
Allocation
The asset
allocation for the fund would be something like this
|
Asset Class |
Minimum % |
Maximum % |
|
Equity and Equity Related
instruments of companies following ESG theme |
80 |
100 |
|
Equity and Equity Related
instruments |
20 |
35 |
|
Debt & Money market
instruments |
0 |
20 |
|
Units issues by REITS and InvITs |
0 |
10 |
The above
figures are only indicative and not fixed, the fund managers have the liberty
to move across the asset classes depending upon prevailing market conditions as
long as they remain within the mandate permitted.
The fund
can also invest in REITs and InvITs if so desired.
Investment style for Aditya Birla Sun Life ESG
Mutual Fund
The fund would be an open ended thematic equity scheme
investing in companies following the ESG theme.
The fund would be market cap agnostic with 60-80 % into
large cap stocks and the remaining in mid and small cap companies.
The fund can invest in foreign securities up to 35% of the
portfolio.
The fund would partner with ESG research provider ‘Sustainalytics’
for ESG scores and ratings.
What are esg mutual funds?
ESG mutual
funds are more concerned with how money is made rather than how much money is
made, they are more concerned with a how a business makes profits rather than
how profitable the business is.
A ESG
mutual fund is not your traditional mutual fund scheme, it views companies from
the ESG lens and therefore the parameters and filters for it are not the same
as other mutual fund schemes.
ESG mutual
funds are built and run on the following three pillars:
Environment
The fund
reviews and judges a company based on:
- Its carbon emissions if any
- Its positive contribution to climate change
- How efficiently it uses the natural resources
- Water and waste management.
The fund
does not expect chemical or refinery businesses to all of a sudden stop using
water but it does expect such businesses to use water more efficiently and only
release effluents into a natural body of water after it has been treated well.
Social
The fund
reviews and judges a company based on:
- Labour management
- How it treats its customers
- Diversity at the workplace
- Gender diversity
- Its positive involvement and contribution to society at large
- The stand in takes on social issues
The stand
the company takes on socially relevant issues has a big say in whether
customers want to see themselves aligned or associated with the company.
Governance
The fund
reviews and judges a company based on:
- Its Whistleblower policy
- Bribery and corruption policy
- Diversity and composition of its board
Any irregularities with the numbers reported, financial fraud
does not show the company in good light. This not only affects the share price
of a company but also puts all the stakeholders in a position where they are
compelled to review their decision to be associated with a company they feel
they cannot trust.
Additional reading: Click Here to read our complete report on SIP, STP AND SWP Plans.
ESG
Mutual Funds Investing strategy
ESG mutual funds are more concerned with what companies ger
right rather than what they get wrong.
The idea is to pick companies that meet certain standards
that have a positive impact on the environment in every aspect and thereby a
healthy outlook for the company too.
If a company has been fined by the environmental authorities
for releasing unfiltered effluents into the waters then it would affect the
stock price negatively too.
Other examples would include unfair working conditions and any
corruption or bribery charges levied against it.
All these events affect everyone related to the company
including the shareholders and overall the environment in every aspect.
ESG mutual funds try to avoid these companies and therefore
there is better downside protection which is as important as upward movement in
share prices.
Advantages
of ESG mutual funds
ESG mutual funds tend to be less stable than other mutual
funds since they refrain from investing in companies, they believe are not
transparent or run the risk of financial malpractices among other things.
The strong filtering process makes sure the fund only
invests in sustainable businesses that provide long term growth while complying
with all the necessary standards.
They are more favourable to investors that look for overall
growth and not merely on the financial side.
Disadvantages
of ESG mutual funds
Because of the stringent filtering process, the fund has a
limited universe from where it can pick which companies to invest in and which
to avoid.
This makes for a very focused portfolio and thereby the fund
does not get the privilege of as much diversification as say other equity
mutual funds.
ESG mutual funds cannot be the core portion of your mutual
fund portfolio since at the end of the day they are still thematic mutual
funds.
These funds may not always work in a bull market since they
may have to overlook certain companies and sectors that do not meet the ESG
requirements.
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