ESG Mutual Funds Versus ETFS: A Comparative Study of India, Europe and Global Markets

Description

DOI: https://doi.org/10.5281/zenodo.20052030

Diksha, Sania Bassi, and Mohit Gupta (School of Business Studies, Punjab Agricultural University, Ludhiana, Punjab)

The rapid growth of Environmental, Social, and Governance (ESG) investments has transformed the world’s financial markets, but adoption trends differ significantly across economies. This research compares the growth of ESG-focused mutual funds and exchange-traded funds (ETFs) in India, Europe, and the global market from 2019 to 2024. By applying descriptive statistics and trend analysis, the study examines assets under management (AUM) using secondary data from the AMFI, Morningstar, EFAMA, PwC, NISM, and other industry reports. According to the findings, India’s ESG market is still in its infancy stage with ESG mutual funds reaching their maximum at 0.35% of total mutual fund AUM in 2020-21 before falling to 0.17% by 2024-25, and ESG ETFs remaining insignificant in spite of overall ETF growth to 11.3% of total industry funds. In contrast, Europe shows structural integration, with ESG mutual funds constituting over 75% of the mutual fund industry and ESG share of total ETFs exceeding 20% by 2024. Globally, ESG ETFs had the highest CAGR (65.5%), highlighting their importance as primary drivers of sustainable finance, despite overall ESG penetration remaining low at less than 5%. These findings highlight significant regional discrepancies: Europe’s growth is fuelled by strong legislative frameworks and high financial literacy, whereas India’s progress is restricted by low investor awareness and poor regulatory adoption. The study explores the practical implications to accelerate ESG adoption in emerging markets such as harmonized disclosure standards, diverse ESG investments, and specialized financial literacy programs. It also provides significant insights for policymakers, investors, and asset managers to navigate the future of sustainable investing.