ICICI Prudential ESG Fund NFO – Should You Invest?
September 20203 min read
ICICI Prudential ESG Fund is the latest addition to the list of mutual fund NFOs. ESG investments or Socially responsible investments are a very popular investment strategy in the US and Europe. According to data from Morningstar; As of March 2020, the US has total assets of USD 119.33 billion and Europe has total assets of USD 683.87 billion under the ESG investment strategy. Similarly, In India, ESG investments have started getting more attention; amid the corporate governance issues, many companies faced over the last few years.
ICICI Prudential ESG Fund is a thematic fund that will follow ESG i.e. sustainable way of investing. Let’s get into the details of the fund and see if it is a good investment opportunity.
ICICI Prudential ESG Fund NFO
ICICI Prudential ESG Fund is An open-ended equity scheme investing in companies identified based on the Environmental, Social, and Governance (ESG) theme. Hence, The Focus of this fund is on building a portfolio of companies that do good for stakeholders and has the potential to create value for shareholders. Some important details of the NFO are as follows:
- The NFO is open from 21st September 2020 to 5th October 2020.
- The minimum application is Rs. 5,000 and in multiples of Re. 1 thereafter.
- Minimum SIP amount per month is Rs. 100 and in multiples of Re. 1 thereafter.
- Exit Load of 1% is applicable if the amount is redeemed before 12 months of unit allotment.
- Taxation of the fund is as per the Equity fund taxation.
- Fund Manager – Mrinal Singh
- Benchmark – Nifty 100 ESG TRI
Now, let’s understand the Fund’s underlying investment philosophy.
ICICI Prudential ESG Fund NFO – Portfolio Details
ESG i.e. Environmental, Social, and Governance criteria are set to identify companies that are socially responsible and conscious. Broadly, these include,
- Environmental criteria or Environmental Empathy check how a company performs as a steward of nature. Therefore, the ICICI Pru ESG fund will select companies that Efficiently dispose of waste, address climate change, prevent pollution, conserve water and energy, etc.
- Social criteria or Social Responsibility examine how a company manages relationships with its employees, suppliers, customers, and the communities where it operates. Under these criteria, the focus is on factors such as on gender equality, women empowerment, quality products, etc.
- Governance or Corporate Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. With corporate governance, the importance is given to Ethical practices, Efficient management, strong internal controls, etc.
As per the Fund house’s disclosure, the companies will be scored under each of these criteria. The investment will only be done in funds with high ESG score. Additionally, the investment universe for this fund is Nifty 100 ESG stocks. Now, let’s move on to the portfolio constituents of the Nifty 100 ESG index to understand which stocks qualify under the ESG criteria.
Should You Invest in ICICI Prudential ESG Fund NFO?
ESG as an investment strategy is more qualitative in nature as the underlying stocks need to fulfill all the Environmental, Social, and Governance criteria. In the recent past, we have seen a lot of corporate governance issues in big corporates like Yes Bank, DHFL, IL&FS. Hence, Following the ESG investment strategy can help the fund manager to avoid such risky stocks and invest in fundamentally strong companies.
The past returns of the Nifty 100 ESG index are less relevant in this case because as a strategy ESG has started gaining more traction recently. The key to return generation for ICICI Prudential ESG Fund lies in stock selection. The Fund manager Mrinal Sungh has been with ICICI Pru AMC since June 2008 and has a long track record of managing some of the flagship funds of the AMC.
Investors can invest in the ICICI Prudential ESG Fund NFO with investment horizon of at least 5 years or more. And, since this is a Thematic Equity Fund, it is more suitable for investors with appetite for high risk. You can also reach out to Investica Support team for any further assistance or information related to this NFO.