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How To Build A ESG Compliant Portfolio?

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If you are someone who has learnt about ESG Investing for the first time and want to build a portfolio of ESG compliant businesses, here’s the best way you can build your ESG compliant portfolio.

We will be looking at the NIFTY 100 ESG Index to learn how to identify ESG businesses.

For starters, Environmental, Social and Governance (ESG) is a form of sustainable investing that measures the impact of a company’s ethical contribution to its stakeholders. You can refer to the NIFTY 100 ESG Index to build your portfolio of companies that comply with ESG guidelines.

What is that you ask?

Know NIFTY 100 ESG Index

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NIFTY 100 ESG is a thematic index designed to reflect the performance of companies within the NIFTY 100 index, based on their ESG scores. The NIFTY100 ESG index was launched on March 27, 2018 with the base date of April 01, 2011. Since its inception, Nifty 100 ESG Index has grown 248%, whereas the blue-chip index NIFTY 50 gained 189%.

While the movement of NIFTY 100 ESG has been steady for the most part, disruptions and market uncertainties during the COVID-19 made the investors to bet on ESG investing heavily. This implies investors have now started focusing on the companies’ ability to sustain their businesses through social and environmental risk management.

Who calculates ESG risk rating?

Sustainalytics, a Morningstar company assesses companies on ESG metrics and rates them. Sustainalytic’s ESG Risk Ratings measure a company’s exposure to industry-specific material ESG risks and how well a company is managing those risks. This multi-dimensional method of measuring ESG risk combines the concepts of management and exposure to arrive at an absolute assessment of ESG risk. We have for you the 5 categories of ESG risk severity, Sustainalytics uses to rate a company.

Negligible = 0 – 10

Low = 10 – 20

Medium = 20 – 30

High = 30 – 40

Severe = 40+

Does this mean you should read Sustainalytics’ reports to identify businesses? No! You may choose to invest in constituents of NIFTY 100 ESG Index and start riding the ESG boom.

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Read more:

ESG – The Latest Trend In Investing
Top 20 ESG Funds Around The World
Rise Of ESG In India

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