Highest-ranked ESG Fund in UK bets big on India

By Loukia Gyftopoulou

A major bet on India as a growth market for low-carbon projects just propelled a UK fund to the top of this year’s ESG rankings.

The Stewart Investors India Subcontinent Sustainability fund, which is domiciled in Britain but manages its 442 million pounds ($592 million) of client money from Singapore, returned 31.2% in the year through November according to Morningstar Inc. data. That’s better than any other UK fund using environmental, social and governance investing strategies over the same period, according to Morningstar classifications.

India has a smaller carbon footprint than Europe and the US and is on track to increase investments in infrastructure and manufacturing, according to an analysis provided by Stewart Investors, which oversees a total of $25 billion. That outlook includes significant spending on renewable energy and low-carbon technologies, it said.

Also Read | In 2021, governments blew hot on 1.5C goal, colder on climate action

According to Sashi Reddy, one of the co-managers of the fund, the economic climate in India means that well-positioned companies stand to “benefit disproportionately,” as the country invests in a future that will rely more on renewable energy and less on coal and other fossil fuels.

The biggest holding in the Stewart Investors fund is Tube Investments. The metals company, which makes bikes and is now exploring the market for electric scooters, is owned by Murugappa Group. The fund, which doubled in size during the past year, also has stakes in Aavas Financiers Ltd., a lender to small businesses and consumers, as well as CG Power and Industrial Solutions Ltd., a power-generation designer that was bought last year by Tube Investments.

India’s finance industry has started channelling more funds to clean-energy projects than to coal-based ones. But an ESG bet on India still brings with it a lot of unknowns. The country remains the world’s second-biggest producer of coal, and its government has yet to figure out how to finance the transition to climate neutrality.

Also Read | The world wants more lithium but doesn’t want more mines

India’s efforts to move toward a greener future made headlines this year. The country used the COP26 climate summit in Scotland to unveil plans to reach net-zero carbon emissions by 2070. Though later than the 2050 deadline the United Nations has touted as crucial, the goal is still compatible with what scientists say is needed to avoid catastrophic global warming.

The biggest holding in the Stewart Investors fund is Tube Investments. The metals company, which makes bikes and is now exploring the market for electric scooters, is owned by Murugappa Group. The fund, which doubled in size during the past year, also has stakes in Aavas Financiers Ltd., a lender to small businesses and consumers, as well as CG Power and Industrial Solutions Ltd., a power-generation designer that was bought last year by Tube Investments.

Also Read | Carbon capture and storage: Where should the world store CO2? It’s a moral dilemma

India’s finance industry has started channelling more funds to clean-energy projects than to coal-based ones. But an ESG bet on India still brings with it a lot of unknowns. The country remains the world’s second-biggest producer of coal, and its government has yet to figure out how to finance the transition to climate neutrality.

India’s efforts to move toward a greener future made headlines this year. The country used the COP26 climate summit in Scotland to unveil plans to reach net-zero carbon emissions by 2070. Though later than the 2050 deadline the United Nations has touted as crucial, the goal is still compatible with what scientists say is needed to avoid catastrophic global warming.

Watch the latest DH Videos here: