ESG investing is everywhere in India right now. But here’s the question nobody wants to ask directly: Does ESG investing give better returns, or is it just a myth?

You’ve probably heard the buzz around sustainable investing India and ESG funds. Your peers might be talking about it. Financial advisors are pushing it. But as a founder or investor, you need the truth, not just the trend, especially when comparing ESG vs traditional investing India.

Understanding ESG properly requires the same clarity that founders seek when learning what investors actually look for or preparing with a funding checklist before making capital decisions. This blog strips away the marketing talk. We’ll look at real data from Indian markets, understand what ESG actually means here, and help you decide if it belongs in your investment strategy.

 

What ESG Investing in India Means?

ESG investing stands for Environmental Social Governance investing. In India, ESG is about how a company acts in our specific society. It’s not just about following global rules. It’s about the practical steps a business takes every day.

• Environmental (E): This looks at how a business handles waste and energy.
• Social (S): This checks if the firm treats its workers and the community fairly.
• Governance (G): This is about being honest and following the law.

Securities and Exchange Board of India (SEBI) now requires big companies to file a report called the Business Responsibility and Sustainability Report (BRSR). This helps different types of investors see the truth about a company’s actions.

There’s often a big gap between what a company intends to do and what it actually executes. Smart investors look for results rather than just good intentions, especially when evaluating ESG investment returns India.

 

How is ESG Funds Performance India Usually Measured?

To know if ESG is working, we have to look at the numbers. We don’t just look at the bank balance. We look at how that money was earned.

• Absolute returns: Most ESG performance discussions start with absolute returns. This means how much money an investment makes over time.

• Risk-adjusted returns: A better measure is risk-adjusted returns. This shows how much return comes with how much risk.

• Benchmarks: We, as investors, compare ESG funds to regular indexes like the Nifty 100. Comparing ESG funds to the wrong index creates misleading conclusions when analysing ESG funds vs regular funds returns.

• Time frames: Short-term news can change things, but long-term trends show true strength.

 

Why ESG Investment Returns India Often Look Better on Paper Than in Reality?

Sometimes the data looks amazing, but the actual experience is different. There are some reasons why ESG scores can be tricky to follow:

• Inconsistent scores: One big reason is inconsistent scores. Different agencies might give the same company very different ESG grades. This makes it hard to know who to trust.
• Sector bias: There’s also a sector bias in many ESG portfolios. Most ESG funds in India have a lot of Tech and Finance stocks. They often avoid sectors like mining, oil, or tobacco. If oil prices go up, traditional funds might win while ESG funds stay behind.
• Greenwashing: We also have to watch out for “greenwashing”. This is when a company spends more time on marketing its “green” image than on actually being green.

• Limited options: In India, there are still only a few high-quality ESG stocks to choose from, which limits how much we can diversify and impacts ESG portfolio performance.

Many investors discover these gaps only when returns disappoint, much like learning where investor money goes when a startup fails.

 

When Does ESG Investing in India Make Sense for Investors?

ESG can be a very powerful tool for certain types of people. It’s perfect if you want to build a portfolio that can survive a crisis.

• Long-term investors: ESG is a great choice if you’re a long-term investor, as it aligns well with portfolios targeting high-growth sectors in 2026. Research shows that companies with high ESG scores often stay more stable over five or ten years. They’re less likely to face big fines or legal trouble.
• Risk-aware investors: Risk-aware investors also like ESG. It acts like a safety net. By picking ethical companies, you avoid the “bad apples” that might crash because of a scandal.
• Values-based investors: It’s also perfect for people who want their money to match their values. You can grow your wealth and help the planet at the same time.

 

Why Might ESG Investing in India Not Deliver Expected Returns?

ESG isn’t a magic wand for every situation. There are times when it might not give you the best result.

• Short-term seekers: If you want a quick profit, ESG is likely not for you. It’s not a “get rich quick” scheme, particularly when comparing ESG vs traditional investing India.
• Chasing optics: Some people chase ESG just for the look of it. Investing just because a stock looks “trendy” can lead to losses, adding to the risks of ESG investing.
• Rating over-reliance: Relying too much on ratings can also be a mistake. A high rating does not always mean the stock will go up next month. If you only look at the label and ignore the business basics, you might lose money when the market changes, affecting ESG funds performance India.

 

How Smart Investors Approach ESG in India?

Smart investors don’t use ESG as their only strategy. They use it as a helpful filter for their decisions. At Gaurav Singhvi Ventures, we follow this balanced path for all our startups.

• Combining ESG with fundamentals: For startups in Surat, Gujarat, and all over India, we combine ESG with the fundamentals. We look at cash flow, growth, and team quality. This is the same approach used by top angel investors and venture capitalists like Gaurav VK Singhvi.
• ESG as a filter, not a strategy: Smart investors do not use ESG as a whole strategy. Instead, they use it as a filter. At Gaurav Singhvi Ventures, we believe in looking at the core business first. We check if a startup has a strong product and a good market. Then, we use ESG to see if the company can last for the next twenty years.
• Portfolio balance: We don’t just put money into an “ESG-only” bucket. We build a balanced portfolio that uses these ethics to reduce risk and find leaders.

 

It’s Time to Re-Think Your ESG Approach!

ESG isn’t a magic way to get extra profit every time. It’s a tool to help you make better choices. In India, the market is still learning. Your returns will depend on how you apply these rules. If you use ESG to find honest, well-run companies, it can be a very powerful way to build wealth that lasts.

At Gaurav Singhvi Ventures, we believe in backing entrepreneurs with vision, expertise, and commitment to building real value. ESG considerations matter to us, too. But they’re part of a bigger picture. If you’re ready to build something lasting, connect with us to explore funding and guidance that helps your startup succeed.

 

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