A COMPARATIVE ANALYSIS OF ESG INVESTMENTS AND TRADITIONAL MUTUAL FUNDS IN INDIA: RISK, RETURN AND INVESTOR PERCEPTION

Abstract

This research explores the rising trend of ESG (Environmental, Social, and Governance) investing in India and compares the performance of ESG mutual funds with traditional equity mutual funds in terms of risk, return, and investor perception. With the increasing emphasis on sustainability, Indian investors are becoming more conscious of the ethical impact of their investments.

This thesis employs a mixed-method approach, utilizing quantitative analysis of financial returns and qualitative analysis through investor surveys. The study reveals that ESG funds offer comparable returns with slightly better risk-adjusted performance while appealing to investors who prioritize sustainability and ethical investing.

The research also highlights the challenges and opportunities within the ESG landscape in India and proposes recommendations for mutual fund managers and regulators.

ESG—short for Environmental, Social, and Governance—is no longer just a global investing buzzword. It’s shaping how Indian investors view their portfolios. This research dives deep into how ESG mutual funds compare to traditional mutual funds in India, looking closely at how they perform, the risks they carry, and what investors think about them.

Using both numbers (CAGR, Sharpe ratios, etc.) and opinions (surveys, interviews), we find that ESG funds, while not always the top performers, offer a safer and more sustainable path for investors who care about ethics, stability, and long-term value.

Environmental, Social, and Governance (ESG) investing is rapidly emerging as a significant financial trend globally, and India is beginning to follow suit. This thesis aims to conduct a rigorous comparative analysis of ESG mutual funds versus traditional mutual funds in India by examining multiple dimensions: return performance, risk metrics, regulatory support, and investor perception.

The study uses a dual-method approach—quantitative data for fund performance (CAGR, Sharpe ratio, and standard deviation) and qualitative data through investor surveys (n=120) and expert interviews (n=3). The study reveals that ESG funds, while slightly lagging in raw returns, offer more stable performance, greater investor trust, and alignment with long-term sustainability goals. This thesis concludes that ESG funds are poised to become a major investment category in India, provided regulatory bodies, asset managers, and investors continue to engage collaboratively.