ESG ETF

An ESG ETF is an exchange-traded fund that tracks an index constructed using Environmental, Social, and Governance (ESG) criteria — selecting and weighting constituent companies based on their performance on sustainability metrics rather than purely on market capitalisation or financial factors. Environmental factors assess a company's carbon footprint, water usage, waste management, and climate change strategy. Social factors evaluate employee welfare, supply chain labour standards, community relations, and diversity policies. Governance factors examine board composition, executive pay, minority shareholder rights, and anti-corruption practices. In India, SEBI introduced ESG disclosure requirements for the top 1,000 listed companies through the Business Responsibility and Sustainability Report (BRSR) framework, and several AMCs have launched ESG mutual funds and ETFs — including Mirae Asset ESG Sector Leaders ETF, Quantum ESG India Fund, and Axis ESG Equity Fund. NSE maintains the Nifty 100 ESG Index as an underlying benchmark for ESG products. For Indian investors, ESG ETFs provide a way to align investment portfolios with personal values around sustainability and governance — with emerging evidence that strong ESG companies face lower regulatory risk, litigation risk, and reputational risk over time, potentially supporting more resilient long-term returns compared to companies with poor ESG profiles.