Morningstar has launched its India Sustainability Index.
This index is part of the Morningstar Global Sustainability Index family that delivers exposure to companies that exhibit high standards of sustainability, based on environmental, social, and governance factors (ESG).
The top five constituents of the index are HDFC (10%), Reliance Industries (9%), TCS (8.1%), Infosys (8%) and HUL (4.7%).
The Morningstar India Sustainability Index tracks the performance of Indian companies that exhibit high ESG standards while diversifying across 11 sectors. The Index is derived from the large- and mid-capitalization subsets of the Morningstar India Index, representing 90% of market capitalization.
Contrary to the commonplace perception that sustainable investing has a performance cost, the index returned 14.8% from 2012 to 2016 compared with 13.7% for the Morningstar India Index.
In India, sustainable investments are expected to grow from $55 billion in 2014 to $240 billion in next 10 years, as per cKinetics. From an ESG perspective, India fares well relative to other emerging markets.
The strong ESG performance is driven by firms that rely on European and U.S. clients, primarily information technology firms, as well as those that are subsidiaries of European and U.S. firms. For example, Wipro and ABB India are ranked first and seventh, respectively, within their peer groups based on sustainability metrics globally.
“Many investors around the world increasingly want to align their investments with their values,” said Sanjay Arya, head of Morningstar Indexes. “Investors need benchmarks for ESG investment strategies that maintain a similar risk/return profile to the overall market.”
Investors across the globe, particularly millennials and women, are actively seeking opportunities to integrate ESG factors in their investment decisions. Globally, sustainable investing has grown at the rate of 61% since 2012 to reach $21.4 trillion in 2014. In Asia, sustainable investment assets grew at a rate of 32% during the same period to reach $53 billion.
You can read more about Morningstar’s sustainability efforts here
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