What are ESG funds, how are they different from traditional MFs?

ESG Mutual Funds: Mutual fund investments help you achieve your financial goals. You invest in them to get good returns and grow your income. Some people invest in equity mutual funds, while others invest in debt, but mutual funds also have a category where you can invest your money in funds that make investments in companies that meet specific criteria in the environment, social, and governance sectors. These funds are known as ESG funds.

Some of the areas where these funds invest are technology, renewable energy, health, infrastructure, etc. But what are they, and how are they different from traditional mutual funds? Get your answers here!

What are ESG mutual funds?

Environmental, Social, and Governance (ESG) funds are a type of mutual fund that invests in companies that meet specific criteria in these three sectors. These are the companies that demonstrate strong environmental, social, and governance practices, aiming to promote sustainability and positive societal impact while generating financial returns for investors.'

How do ESG funds vary from traditional mutual funds?

Traditional MFs primarily focus on maximising returns by investing in companies with strong financial performance. ESG funds, on the other hand, add an additional layer of analysis, evaluating companies based on environmental, social, and governance criteria. This can lead to a more diversified portfolio with exposure to companies committed to sustainable practices.