By Yoosef K IST (Released)

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The Nifty100 ESG Index – a gauge designed to reflect the performance of stocks based on environmental, social and governance (ESG) score – has lost 5.4% of its value since the start of the year, against a decline of 1.2% recorded by the benchmark Nifty50 index. The ESG index had outperformed since its inception, except for 2019.

The Nifty100 ESG Index, which mostly outperforms benchmarks, is struggling to find its footing in 2022 as soaring energy prices and rising interest rates have caused investors to balk. to green actions. What is even more detrimental to ESG performance is the continued weakness in information technology meters.

Certainly, IT stocks boast a weight of 21% on the ESG index, compared to a combined weight of 27% by RIL HDFC Bank and ICICI Bank on the Nifty50. While Reliance Industries enjoys the highest weight of 10.8% on the Nifty50, the largest private lender, HDFC Bank has another weight of 8.3% on the index. In contrast, Infosys and TCS together have a total weight of 11.6% on the Nifty ESG index.

The Nifty100 ESG Index – a gauge designed to reflect the performance of stocks based on environmental, social and governance (ESG) score – has lost 5.4% of its value since the start of the year, against a decline of 1.2% recorded by the benchmark Nifty50 index. The ESG index had outperformed since its inception, except for 2019.

While ITC, ICICI Bank, M&M, SBI and Axis Bank increased their gains in the benchmark, IT players such as Tata Consultancy Services, Infosys, HCL Technologies, Tech Mahindra and Wipro lost between 17 and 42% so far in 2022. The market cap erosion of the top five IT stocks so far this year stood at Rs 7.7 lakh crore.

Green turns red in 2022
Year ESG NIFTY100 (%) Clever50 (%)
2012 33.4 27.7
2013 9.1 6.8
2014 31.9 31.4
2015 -2.2 -4.1
2016 3.2 3.0
2017 31.6 28.6
2018 4.0 3.2
2019 11.0 12.0
2020 21.6 14.9
2021 30.7 24.1
2022* -5.4 -1.2

In fact, flows into sustainable funds have dried up around the world due to concerns about the global recession, inflationary pressures, rising interest rates and the conflict in Ukraine. Total flows to global sustainable funds decreased sequentially by 62% to $32.6 billion at the end of June 2022. “The drop in net new funds to sustainable funds was felt across all regions. Some parts of the world have even experienced exoduses. US-domiciled sustainable funds lost $1.6 billion, their first quarter of outflows in more than five years,” Morningstar observed in its July report.

Source: Bloomberg

Even ESG ETFs in India saw outflows of $6.6m in the first half of 2022 compared to inflows of $10.2m recorded in the same period last year. Globally, net inflows into ESG ETFs have slowed in 2022. According to Bloomberg, net inflows into APAC through July 2022 were $17.5 billion, down significantly from $70.9 billion in 2021.

Source: Bloomberg