Avendus Capital said ESG-focused companies continue to outperform their non-ESG counterparts and anticipates more ESG-focused investment flows into the country. ESG-focused equity funds in India have grown from $ 330 million in 2019 to $1.3 billion in June 2023, it said.
“Companies with higher ESG scores find it easier to raise funds at lower interest rates,” said Gaurav Sood, head-equity capital market, Avendus Capital. “Cheaper access to capital leads to higher operating margins and shareholder returns.”
The Nifty 100 ESG index has been outperforming Nifty 100 for the last few years. In the past six months, Nifty 100 ESG gave a return of 17.71% compared to 15.20% returns by the Nifty 100.
India is expected to issue $3 billion of green bonds in FY24, which could encourage more green funds in the country.
A transition to clean energy is expected to gradually lead to the reclassification of multiple Indian companies as ESG assets, and this will act as a substantial economic opportunity in India, said the Avendus report.
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