Six industry veterans and asset management company Quantum Advisors have tied up to float a $1 billion (Rs 7,114 crore) environment, social and governance (ESG) fund to invest in India’s public equity markets.
This is the second such fund to be floated in India after KKR-controlled Avendus Capital Public Markets Alternate Strategies LLP launched an ESG fund in August last year with an aim to have $1 billion in assets under management in three years’ time.
As many as six industry veterans, including three former Tata Group senior executives, have come together to float this fund. They include Quantum’s founder Ajit Dayal, former Tata brand custodian and member of the group executive council Mukund Rajan, former Tata Capital chief operating officer Govind Sankaranarayanan, former Tata Sons director Alan Rosling and former Grant Thornton India LLP top executive Harish HV.
Quantum's Dayal will lead the investment team, while Mukund Rajan will chair the proposed joint venture, the fund house said in a statement.
“The focus on ESG offers a new and much-needed mantra for sustainable investing and better risk-weighted returns to investors,” said Rajan. “Aligning this with an active engagement style will help to push the larger agenda of improving the quality of life of the communities served by companies we invest in, and a better environment for our common future.”
The fund will adopt an engaged-private equity approach to public-market investing. It aims to work with companies willing to recognise the long-term advantages of actively adopting ESG standards of excellence.
While predominantly investing in mid-caps as part of its portfolio strategy, the fund may also look to invest in large-cap listed firms that can benefit from the approach of sustainable investing.
Investing on the basis of Environmental, Social and Governance (ESG) criteria appears to be gaining ground in international capital markets.
ESG strategies adopted by funds are yielding higher returns, higher profitability, lower idiosyncratic risk and higher valuations for both funds and portfolio companies, according to the statement.
“Yet, in comparison with other markets, the need and opportunity for higher ESG standards in India are enormous. With 18% of the world’s population, India is one of the most important geographies for the achievement of the United Nations Sustainable Development Goals (SDGs)…India is also the third-largest producer of greenhouse gas emissions in the world,” stated the fund house.