As an investor do you look at ESG investing as a useful guide? In case there are people who are wondering what is ESG investing, it is an idea that investors should look at companies that care about Environment, Social, and Governance issues while investing.

ESG factors are part and parcel of the fundamental, bottom-up research conducted by many big investors in the US and many FII are mandated to invest in ESG companies.

Most FII are convinced that they do have a solid structure for ESG compliance which they have developed and which will work in developing countries like India. Does this have an implication for you and me?

The answer is a resounding yes. If you are a small investor investing in a company where the owners belong to a particular political party, it could have “social” implications. Let’s assume that you have invested in a business which is a known supporter of Sangh Pariwar (in BBC language, the Right Wing Hindu Nationalist Party), you may have to be worried. We have seen how the Left is capable of creating such a bad atmosphere that FII may not buy it at all, or in a worse case, sell all that they have on one day! So you need to be ethical, moral, environment friendly…..oops did I say it was easy.

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  1. In India, No company can expect to grow big without making political party donations that are expected to come 1st, 2nd and 3rd places in the respective area where they operate. These donations are made irrespective of political orientation of promoters/company and considered to be sunk costs claiming some relief under section 80G.

  2. 80GGB of IT. Most companies that get entangled in legal issues are because of parties(or tax departments on their behalf) filing cases in courts on flimsy grounds when they haven’t received anything u/s 80ggb. The strength of companies to come out of this mess later on, also depends on this donation (if they change their mind seeing the notice and decide to donate), because departments can field a strong/weak lawyer later depending on companies action. In Harry Potter language, this is called dark arts ..

  3. New ‘spin bowling’ by asset gathering AMCs. ESG concept is still new and might work in the west but not here.

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