Avendus Capital has started accepting money for one of India’s first funds to base investment decisions on environment, social and governance parameters as investor concerns about governance at Indian companies surge.
“Traditionally, university endowments and pension funds tend to participate in ESG. But we are now seeing a lot of appetite also from millennial, high net-worth investors and family offices,” Abhay Laijawala, managing director at Avendus Capital Public Markets Alternate Strategies, said. “The compelling newsflow around climate change and work-related issues is driving this shift.”
Avendus expects to raise $1 billion over two years with its ESG fund and sees around 70% of that money coming from overseas investors. Laijawala declined to say how much his fund has raised so far. The firm has an exclusive agreement with proxy advisory firm Institutional Investor Advisory Services India, or IiAS, to assess NSE Nifty 100 Index companies based on ESG scores, and aims to invest in no more than 25.
Global investment based on ESG strategies stood at nearly $23 trillion at the end of 2015, according to the most recent data available from the Global Sustainable Investment Alliance, published in a report sponsored by Bloomberg LP, the parent company of Bloomberg News. While sustainable investment is now well-entrenched in Europe and the US, the concept is just getting off the ground in India.
The timing couldn’t be better for Avendus, a financial company backed by KKR, as India Inc struggles with a host of governance issues ranging from troubled relationships between companies and their founding firms to poor disclosures on debt.