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ESG funds invest in companies with strong Environmental, Social and Governance practices, promoting ethical investing, long-term growth, lower risk and portfolio diversification.
ESG Mutual Funds
ESG Mutual Fund Explained: ESG funds are mutual funds or ETFs that invest in companies with good environmental, social, and governance practices. The goal is to support businesses that behave responsibly toward the planet and society. These funds usually include companies working in clean energy, treating their workers well, or following fair and transparent governance.
ESG stands for Environmental, Social and Governance and it is at the heart of what is known as sustainable investing. In simple terms, ESG investing means putting your money into companies that care about the planet, treat people fairly and follow strong ethical rules in how they run their business.
The “E” in ESG looks at how a company affects the environment—like whether it is reducing pollution, saving energy, or managing waste responsibly. The “S” focuses on how companies treat their employees and contribute to society. The “G” covers how the company is managed, whether it follows rules properly and whether it acts with honesty and fairness.
In ESG investing, it is not just about profits but how those profits are earned.
Types of ESG Funds
Exclusionary Funds – Avoid investing in harmful industries like fossil fuels or tobacco.
Best-in-Class Funds – Pick companies that score the highest on ESG standards within their sector.
Thematic Funds – Focus on specific themes like renewable energy or gender diversity.
Impact Funds – Invest in companies actively working to create a positive impact, like healthcare or education.
What Are Benefits Of Investing In ESG Funds?
Ethical Investing – Your money supports companies doing the right thing.
Long-Term Growth – Companies with strong ESG values often perform better over time.
Lower Risk – Avoids firms involved in scandals or risky behaviour.
Diversification – ESG funds invest in different sectors, offering balance to your portfolio.
5 Options To Invest In ESG Funds
| Fund | AMC |
| SBI ESG Exclusionary Strategy Fund | SBI Mutual Fund |
| ICICI Prudential ESG Exclusionary Strategy Fund | ICICI Prudential Mutual Fund |
| Quantum ESG Best In Class Strategy Fund | Quantum Mutual Fund |
| Aditya Birla Sun Life ESG Fund | Aditya Birla Sun Life Mutual Fund |
| Axis ESG Integration Strategy Fund | Axis Mutual Fund |
In short, if someone wants to not just invest their money for returns, but for those companies who are running ethically in environment, social and governance aspects, then they can choose ESG mutual funds.
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
November 20, 2025, 07:08 IST
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