Lots of NFOs: WhiteOak Capital launches an ESG fund, but is it worth it? | personal finances

“Historically, Nifty100 ESG TRI has outperformed Nifty 100 TRI in 11 out of 14 financial years (including FYTD 2025). Nifty100 ESG TRI rose 14.6% CAGR compared to 13.7% for Nifty 100 from April 11 to September 24. While CAGR for TRI, Nifty100 ESG TRI has underperformed Nifty 100 TRI over the last 3 years (past performance may or may not be sustained in the future), the company said in a release.

“In DCF (discounted cash flow) models, typically over 80% of the value comes from residual value. Forecasts of future growth and significant baseline growth rates, multiples and terminal values ​​assume the sustainability and longevity of the business, which we suspect cannot come at the expense of environmental damage, ignoring social obligations and short-term minority shareholder turnover. . Poor ESG practices pose a risk to a company's longevity and thus reduce residual value,” said Ashish Somaiya, CEO, WhiteOak Capital Asset Management Limited.

The fund will use its ownership structure to evaluate companies for their corporate governance practices.

“Under this framework, companies are assessed based on their accounting practices, alignment with minority shareholder interests, capital allocation, board composition, and compliance with relevant laws and regulations,” said Ramesh Mantri, CIO at WhiteOak Capital Asset Management.

Based on this assessment, companies are placed in an internal ranking from one to twelve, with companies ranked 1 being the best managed and companies ranked 12 being the worst managed.

Under the program, the investment area will include companies ranking first to fourth in their ownership structure.

As part of the investment portfolio, the Fund will invest in ventures with high return on capital growth, scalable long-term opportunities, strong performance, etc., which are available at an attractive valuation, i.e. base value at a significant discount to the current market value price.

As per SEBI guidelines, the scheme will only invest in securities for which a Business Responsibility and Sustainability Report (BRSR) has been disclosed. The Fund will use the services of SEBI registered third party ESG rating providers to prepare rating reports and other research to support the decision-making process.

Under the program, at least 65% of assets under management (AUM) will be invested in companies reporting a comprehensive BRSR and ensuring disclosure of basic BRSR information. The remaining AUM of the scheme can be invested in companies having BRSR disclosure.

The fund will be managed by Ramesh Mantri (Equities), Tripti Aggarwal (Deputy Fund Manager, Equities), Dhiresh Pathak (Deputy Fund Manager, Equities) and Piyush Baranwal (Debt).

Who should invest in such NFOs?

“As for you – the investor – no fund company must have more than five funds. These should be a conservative and adventurous equity fund, a liquid fund, an income fund and an equity income fund. Tax on Hybrid equity funds and hybrid funds. There may be savings variants, but the actual names of these five types of funds may vary, but such mutual funds can meet the actual savings and investment needs of any investor,” Kumar said.

Portfolio allocation:

• The funds' portfolio allocation will include equities and equity-linked instruments of environmental, social and governance (ESG)-driven companies adopting best-in-class strategies: 80%-100%, equities and equity-linked instruments of other companies. 0-20%, debt securities and money market instruments.

• 0-20% and units issued by REITs and InvITs.

• In line with its best-in-class strategy, the program will invest in companies and issuers that outperform competitors on one or more ESG-related metrics. The scheme will invest under 'other equity and related instruments' in line with the best-in-class strategy pursued under the scheme.