NFO Update: ICICI Prudential ESG Fund

ICICI Prudential Mutual Fund, the third-largest mutual fund house in India with assets under management (AUM) of about Rs 3,44,164 crore as on July 31, 2020, and more than 68 MF schemes have announced the launch of its new open-ended equity scheme, ICICI Prudential ESG Fund.

The new fund offer (NFO) has already opened up for a subscription on September 21, 2020, and closes on October 5, 2020. The scheme reopens for the ongoing subscription and redemption within five business days from the date of allotment. This fund falls under the thematic category as per the SEBI categorisation.

Objective: It is an open-ended equity scheme that would invest in a diversified basket of companies identified based on the environmental, social, and governance (ESG) criteria. The primary objective of the scheme is to generate capital appreciation by investing in these stocks.

Strategy: The fund will select stock for the fund based on environmental, social & governance (ESG) aspects of the companies. The scheme would follow ESG parameters to identify stocks as the absence of these factors impact or pose risks to the long-term sustainability of the business. Therefore, before selecting a stock for the fund, the fund manager will delve deeper into a company’s management practices, culture, and risk profile, which would thereby help in understanding the impact on long-term investors. The scheme shall invest in stocks that form a part of the benchmark index and/or stocks in AMC’s research coverage, based on ESG scores. During the internal research process, each company shall be assigned an ESG score based on its policies, processes, and practices with regards to the environment, social development, and corporate governance. To arrive at an ESG score, the AMC shall use various publicly available information or data shared by the external service provider.

The portfolio shall be reviewed and rebalanced on a periodic basis due to the change in the ESG score of a particular stock forming part of the scheme’s portfolio. The fund manager may at his discretion carry out an ad-hoc rebalancing in case of adverse information about the stock forming part of the scheme’s portfolio.

Fund Manager: The scheme will be together managed by Mrinal Singh, Deputy CIO – Equity, as well as Priyanka Khandelwal, who is a dedicated fund manager of overseas investments of the scheme. Mrinal Singh manages 13 funds out of which, 11 are jointly managed. 

The performance of the scheme will be benchmarked against Nifty 100 ESG TRI.

There are already three funds in this category that have given mixed returns at different points in time. Nifty 100 ESG, however, has been able to beat Nifty in the last one month, three months, and six months period.