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ESG funds: Investment avenues that will be game changers by 2025

Amid a climate weighed down with uncertainties and financial challenges, the last few years have demonstrated intelligence and resilience by Indian investors who have tightly held on to their existing investment portfolio and not taken panic-stricken decisions.

But now that the pandemic has transformed much of the economic landscape, ushering in a ‘new reality’ that has abandoned the traditional financial structure, investors are now seeking out unique investment opportunities which can offer hefty returns.

Explained simply, creating wealth in leaps and bounds and not storing wealth is the key mantra for millennial investors.

A powerful synergy of technology and financial management has paved the way for some dynamic new-age investment avenues, which are on their way to becoming perhaps one of the most lucrative money-making options in the coming three years.

1. ESG funds

Funds that invest in environmental, social, and governance (ESG) issues are fast gaining traction across the world. As per the latest statistics, ESG assets will be worth $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management.

Globally, governments as well as environmentally and socially conscious young investors have taken strong preference for ESG as an investment avenue as it promises sustainable growth by mitigating non-financial risks for businesses.

Although India currently houses several ESG-themed mutual fund schemes, these have still not gathered steam.

However, given the current environmental crisis, government, regulators as well as institutional investors will undoubtedly welcome investments in ESG-focused funds to ensure long-term sustainable businesses, soon.

2. Cryptocurrencies

These are highly volatile digital currencies that are traded online to make handsome profits in a short time.

Transactions in cryptocurrencies, like bitcoins, as an investment option has grown exponentially in India particularly after the government gave some semblance of legitimacy to these virtual assets following its Union Budget proposal to levy a 30% tax on them.

Cryptocurrencies are currently the riskiest investment option as it remains unregulated globally. However, digital currency is the future (the Reserve Bank of India is also planning to launch one).

Moreover, governments the world over are trying to reach a consensus on how to frame a law to check trading in cryptocurrencies. Once this happens it will only boost further transactions in this asset.

3. International Equity

Investing in global stocks is a fast-emerging investment option for domestic retail investors to diversify their portfolios.

Although Indian capital markets are yet to penetrate deeply into the remote areas and expand on the retail base, smart and experienced equity investors are trading in top global stocks either directly or via mutual funds.

Exposure to international companies will be a must-have asset in the investor portfolio for increasing net worth in the long-term as more countries besides the US join the bandwagon to become hot investment destinations in the coming years.

While the above avenues are attractive investment options they are not without substantial risks. Investors are therefore advised to make a detailed analysis of the information available on the assets before taking an investment call.

It is also sensible to go for a long-term investment strategy for optimal returns and at the same time safeguard oneself from market fluctuations.

(The author is Director, ANMI)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)


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