SBI ESG Portfolio

Sustainability is the key to long-term success in business and investing. Launched over 5 years ago, SBI ESG PMS is amongst the first ESG funds in the country. ESG Investing is also known as sustainable investing where the endeavour is to identify companies that score well on Environmental consciousness, Social responsibility and Corporate governance. Because these companies do well on the ESG framework, not only are they expected to be more sustainable businesses from a long-term perspective but also subject to less volatility from shocks from government, regulatory changes and irregularities on governance. While ESG is the starting point for the selection process, the business evaluation considers prospects on long term growth and profitability as central to investment success. Further while we also follow certain sector exclusions, the eventual portfolio is well diversified across sectors. The final portfolio is sector agnostic, market cap agnostic, concentrated portfolio of 20-25 bottom up ideas.

Investors need to understand some vital aspects about this portfolio.

1) ESG PMS is a market cap agnostic fund and typically has a high representation of mid and small caps.

2) The portfolio is concentrated with less than 25 stocks allowing sizeable representation to each investee company.

3) Given the bottom-up nature of the fund, the overlap with benchmark indices is very low.

While these aspects are critical to generating outsized outperformance over long periods in our view, they can also lead to short term volatility on absolute as well as relative performance versus benchmarks. Therefore, investors with a long-term time frame of 3-5 years and the ability to withstand short term volatility should consider this portfolio.