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Green Investing: How to Invest in ESG Funds for a Sustainable Future

MySmartGrowthTeamFebruary 10, 20252 Mins read6 Views

In recent years, green investing has gained significant traction among investors seeking not only financial returns but also a positive impact on the environment and society. ESG funds—focused on Environmental, Social, and Governance (ESG) criteria—offer a great way to align investments with values. With climate change concerns and ethical investing on the rise, ESG funds are the new buzzword in the financial world. But how do you get started with green investing?

In this guide, we will take you through what ESG funds are, why they matter, and how you can invest in them for long-term wealth creation.

What Are ESG Funds?

ESG funds invest in companies that meet specific environmental, social, and governance criteria. These companies are typically evaluated on their efforts to reduce carbon footprints, improve employee welfare, maintain diversity, and ensure strong corporate governance.

ESG Breakdown:

Environmental: Focuses on sustainability, carbon emissions, and renewable energy initiatives.
Social: Examines a company’s relationships with employees, suppliers, customers, and communities.
Governance: Involves transparency, executive pay, shareholder rights, and ethical business practices.

Why Should You Invest in ESG Funds?

Sustainable Wealth Creation
ESG funds prioritize companies that are more resilient to environmental and social risks, providing long-term growth opportunities.
Lower Risk
Companies that follow ESG practices tend to have fewer scandals, fines, or business disruptions, reducing investment risk.
Growing Demand
ESG investing is becoming mainstream, with global ESG assets expected to exceed $50 trillion by 2025.
Positive Impact
It allows investors to contribute to a more sustainable and ethical world while earning returns.

Steps to Invest in ESG Funds

1. Know Your ESG Goals

Before investing, define what matters most to you—whether it is environmental conservation, social equality, or good corporate governance.

2. Research ESG Funds

Look for funds that match your goals. Here are a few popular ESG funds in India:

SBI Magnum Equity ESG Fund
Axis ESG Equity Fund
ICICI Prudential ESG Fund

3. Check Performance and Portfolio

Analyze the fund’s past performance and the companies it invests in. While ESG funds aim for sustainability, it is essential to ensure they offer good financial returns.

4. Consult a Financial Advisor

If you are new to investing, it is wise to consult a financial advisor for guidance on the best ESG funds based on your risk appetite and financial goals.

Top ESG Funds in India for 2025

Fund Name	1-Year Return	3-Year Return	5-Year Return
SBI Magnum Equity ESG Fund	12.5%	15.2%	11.8%
Axis ESG Equity Fund	13.0%	14.8%	12.1%
ICICI Prudential ESG Fund	11.7%	13.9%	10.5%

Note: Returns are indicative and may vary. Please check the latest performance before investing.

Things to Keep in Mind Before Investing

Higher Expense Ratios – ESG funds may have higher expense ratios than traditional funds.
Limited Track Record – Some ESG funds are relatively new and may not have a long performance history.
Greenwashing Risks – Not all funds claiming to be ESG are genuinely sustainable. Always verify the fund’s ESG methodology.

Future of Green Investing

The future of green investing is bright as more investors become aware of their social and environmental impact. In India, the push for renewable energy, clean technology, and sustainability initiatives will drive the growth of ESG investments.

Final Thoughts

Investing in ESG funds is not just about returns; it is about making a difference. By choosing companies that prioritize sustainability and ethics, you can build wealth while supporting a better world. Start your green investing journey today and become part of the movement for a brighter future.