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LoansJagat Team
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10 Min
08 May 2025
Sanya is 26, a marketing manager based in Pune, and earns ₹85,000 per month.
She invests ₹10,000 out of her own ₹20,000 monthly savings in SIPs. She has been investing in large-cap mutual fund schemes for 2 years and has a portfolio of almost ₹2,60,000 with an average CAGR (Compound Annual Growth Rate) of 11%.
However, there is something that has been on her mind recently.
And every time she sees that, she thinks—
“Yeh paisa jo maine invest kiya hai, kya yeh galat logon ke haath mein jaa raha hai?”
It is where Sanya discovers ESG funds—a modern-day investment option that generates profit plus purpose.
They invest in companies that excel at:
"Are ESG funds worth it in 2025, or is it marketing ka jhaansa?"
Let's get into it.
You might have come across the term ESG being used so widely nowadays, especially by fund houses and financial influencers. But how important is it to a retail investor in India?
In desi terms, think of ESG funds as building a “sanskari portfolio”.
These are companies that make money the right way—without cutting corners or hurting society.
Still lost? Let's break it up even further:
Pillar | What It Means on the Ground | What It Looks Like in India |
Environmental | Sustainable practices | Use of solar power, low carbon footprint |
Social | People-first approach | Fair wages, inclusive workplaces |
Governance | Ethical business | No frauds, strong boards, transparent audits |
When Sanya wanted to dip her toes in ESG investing, she did not completely overhaul her portfolio overnight.
Switched ₹2,000/month from existing SIPs to a new ESG Mutual Fund (Axis ESG Equity Fund)
Began with a direct growth plan through an online channel (no agent commission, lower expense ratio)
Her investment goal: ₹24,000 in a year
Expected returns: Around 9% to 10% CAGR, slightly down but more value-driven
She also looked at the fund's ESG rating, historical returns (historical 3-year CAGR: 9.49%), and top holdings (Infosys, Tata Consultancy, HUL)
As she explains, "Same SIP cycle, bas, company ki soch thodi better honi chahiye na?"
Yeh toh ab sab jaante hain—2023 and 2024 were filled with climate catastrophes, mass firings, and global regulatory crackdowns.
Investors started to wonder:
"Mere paison ka impact kya hai?"
Sochne wali baat yeh hai—
“Jab bade players move kar rahe hain, should we really stay behind?”
ESG investment is mainstream globally, but in India, it is still waiting to find its place. Regulations are evolving, awareness is growing, and funding options are slowly on the rise.
Whereas global markets have made ESG disclosure mandatory, India is at the "voluntary-to-mandatory" stage.
But private investors like Sanya aren't waiting for it to become popular. They're proactively taking control and making conscious investment choices—even in advance.
Here is a comparison of India's association with the global ESG trends, with real examples provided by Sanya's portfolio for better understanding:
Metric | India | Global | Sanya’s ESG Example (2025) |
ESG AUM (2024) | ₹18,500 Cr | $35 Trillion | Sanya moved ₹35,000 (about 12% of her portfolio) into an ESG fund in April 2025. |
ESG Reporting Mandates | Voluntary for most companies | Mandatory in the EU and US | She avoided one fund that had exposure to a company lacking ESG disclosures in its BRSR report |
Retail Investor Awareness | Low to Moderate | High | Sanya found out about ESG through a friend’s Insta reel + an Axis AMC webinar |
SEBI’s BRSR Norms | For the top 1000 listed firms only | NA | She reviewed the BRSR report of Infosys before finalising her ESG investment decision |
Yes—and not just ethically, but economically.
By investing ₹35,000 in an ESG fund in April 2025, Sanya was able to grow her investment by approximately ₹2,822 in 10 months (based on a 9.7% CAGR). That's a return of ~8.1% without regard to market movements.
She now invests in companies that prioritise climate responsibility, ethical leadership, and inclusive workplaces—values that align with her own beliefs.
"Green" Mein Bhi Return Hai: ESG Funds' Performance
‘Returns toh sab dekhte hain, right?’
But in 2025, smart investors do not care much about numbers—they want profits with a purpose. ESG funds, once the
"feel-good" funds, are now showing they can walk hand in hand with traditional mutual funds.
Here's where some of the top ESG funds have performed recently:
ESG Fund | 3-Year CAGR | Source |
Axis ESG Integration Strategy Fund | 8.27% | axismf.com |
Kotak ESG Exclusionary Strategy Fund | 8.49% | kotakmf.com |
SBI ESG Exclusionary Strategy Fund | 8.73% | indiatimes.com |
For example, a couple of months ago, Sanya started questioning where her money was going. She didn’t want her
investments funding companies with shady ethics or poor environmental records. So, she decided to try something different.
She initiated a SIP of ₹4,000/month in the SBI ESG Exclusionary Strategy Fund, which has achieved approximately 8.73% CAGR in the past 3 years.
By 12 months, she had put in ₹48,000.
Her portfolio? Worth around ₹51,555.
₹3,555 ka profit—not massive, but meaningful, considering the peace of mind she gets knowing her money is working towards something good.
“Yeh paisa sirf kama raha hai nahi... kuch accha bhi kar raha hai,” Sanya says with a smile.
Aam aadmi ke liye yeh kaafi simple hai—just 3 steps aur do.
Step 1: Pick the Right ESG Fund
Step 2: Check the Ratings
Step 3: Start Investing
Sanya was confused at first—should she go the direct stock-picking route or stick to a mutual fund SIP for ESG investing?
She didn’t have hours to analyse quarterly reports or ESG disclosures, so she chose the mutual fund path. And it paid off—without the stress.
Criteria | Mutual Funds (ESG) | Direct Stock Picking (ESG) | Sanya's Real Example |
Ease of Investing | Very easy – ideal for beginners | Requires time, effort and research | Set up a SIP of ₹2,000/month via Groww |
Risk Level | Moderate – diversified portfolio | High – depends on chosen stocks | Avoided company-specific risk by choosing a mutual fund |
Research Required | Minimal – the fund manager handles it | High – need to track ESG ratings, news, and reports | Trusted fund manager's expertise at Axis ESG |
Returns Potential (3Y CAGR) | ~8% to 9% CAGR | Can be 12% to 15%, but highly volatile | Her ₹24,000 investment became ₹25,980 in 1 year |
Best For | Retail investors, working professionals | Market-savvy, active investors | As a 9-to-6 professional, a mutual fund suited her best |
Let's get real—not all things about ESG investing are ideal. While it's nice to invest responsibly, there are a couple of speed bumps along the way:
The Indian ESG mutual fund universe is still tiny. As of 2025, there are only about 8 active ESG funds available (Source: IBEF).
Companies with high ESG scores often attract too much investor attention, pushing prices up.
What happens? You end up paying a premium, but the returns may not match the hype.
ESG ratings aren’t standardised. One agency may rank a company highly, while another might not. This makes it harder to compare funds objectively.
It combines your several outstanding debts into a new loan with a single monthly payment and a reduced interest rate to help you lower your financial stress.
Once you’ve consolidated your debt, you’re in a cleaner financial position. Now, investing in clean, ethical, and sustainable funds like ESG makes perfect sense.
Particulars | Personal Loan | Credit Card Debt | Education Loan |
Outstanding Amount | ₹60,000 | ₹30,000 | ₹30,000 |
Interest Rate (p.a.) | 18% | 36% | 13% |
Monthly EMI/Repayment | ₹3,500 | ₹3,000 | ₹4,500 |
Total Monthly Outflow | - | - | ₹11,000 |
Investment Possible | ₹0 | No savings left | ₹0 |
Financial Situation | High stress | No wealth creation | Scattered payments |
Particulars | Consolidated Loan |
Total Loan Amount | ₹1,20,000 |
Interest Rate (p.a.) | 9% |
Monthly EMI | ₹6,500 |
Total Monthly Outflow | ₹6,500 (₹4,500 saved monthly) |
New SIP Investment in ESG Funds | ₹2,000/month (SBI ESG Fund) |
ESG Fund Value After 1 Year | ₹25,116 (@ 8.7% CAGR) |
Financial Outlook | Peace of mind + Wealth building |
By refinancing 3 high-interest loans into a single low-interest consolidated loan, Sanya:
Let's bust a myth—ESG mutual funds don't have additional tax rebates. But they are taxed the same way as any other equity mutual fund under the new tax regime implemented in mid-2024.
If you redeem your ESG fund units within 1 year (i.e., short-term), your gains are taxed at 20% as Short-Term Capital Gains (STCG). (AMFI India)
So technically, koi alag se rebate nahi hai, but the new rules do favour long-term, ethical investing, just like ESG.
For example, Sanya invested ₹2,000/month in the SBI ESG Exclusionary Fund from February 2024.
As her gain is way less than the ₹1,25,000 LTCG exemption, she pays no tax—a win-win!
For Sanya, ESG investing is not about the returns—it's about living her values with her money. Investing ₹35,000 in ESG funds is supporting responsible business while she still realises a decent 8% to 9% return.
While ESG funds don't provide additional tax benefits, they bring that great feeling of knowing her money is going to make the world a better place. In 2025, if you are concerned about growth and, of course, impact, ESG funds are well worth considering.
Yes, they can be invested in through SIPs and are handled by professionals.
Yes, ESG funds have delivered competitive returns, usually matching or even beating conventional funds.
No, ESG funds are taxed like other equity mutual funds (STCG/LTCG).
Look at the fund's fact sheet on AMC websites or sites like Morningstar.
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
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