Performance Measurement of Emerging ESG themed Equity Mutual Funds: Evidence from India

Abstract

Purpose: The purpose of this study is to measure the performance of emerging Environmental, Social, and Governance (ESG)–themed equity mutual funds in India. The paper aims to assess whether ESG-oriented funds have been able to deliver risk-adjusted returns comparable to or superior to conventional equity mutual funds, while also examining their consistency, volatility, and downside risk in the Indian capital market context.

Design/Methodology/Approach: A sample of selected ESG-themed equity mutual funds operating in India is analysed over a defined study period. Performance is evaluated using standard risk–return measures such as mean returns, standard deviation, beta, Treynor ratio, Sharpe ratio and Jensen’s alpha. Benchmark market indices and comparable non-ESG equity funds are used for relative performance evaluation. Statistical tools and hypothesis testing are employed to examine the significance of performance differences.

Findings: The empirical results indicate that emerging ESG-themed equity mutual funds in India have demonstrated competitive returns with relatively moderate risk levels. While some ESG funds outperform their benchmarks and conventional peers on a risk-adjusted basis, others show comparable but not superior performance.

Originality/Value: This study contributes to the limited empirical literature on ESG mutual fund performance in the Indian context. By focusing on emerging ESG-themed equity mutual funds, the paper provides deep insights for stakeholders like general investors, fund managers, and policymakers regarding the financial viability of sustainable investing in India.

Paper Type: Empirical Research Paper