ESG mutual funds: 3 of 8 beat the Nifty 500 over 3 years

What makes a fund ESG in India

India is stricter than most markets about the ESG label. As our guide to ESG funds sets out, a SEBI ESG scheme must declare one of six strategies (exclusion, integration, best-in-class and positive screening, impact investing, sustainable objectives, or transition), keep at least 80% of its money in equity that fits that strategy, and keep at least 65% in companies that report under SEBI's BRSR framework and have their core disclosures independently assured. The funds sit in the sectoral/thematic category.

We looked at the indices behind the idea in ESG indices vs the Nifty 100. This post looks at the funds.

Ten active funds, ₹9,880 crore

Every active ESG fund with a Direct Growth plan, with the strategy in its name. Assets are AMFI's average for July to September 2026, the expense ratio is the Direct plan's latest disclosure, and returns run to 9 October 2026; a year or more is a yearly rate.

"Since" is the first NAV in our data; for SBI's fund that is a Regular-plan NAV from November 2006. The index rows are total-return figures we rebuilt from NSE's closing levels and daily dividend yields.

The index route. The one passive ESG option is the Mirae Asset Nifty 100 ESG Sector Leaders ETF, with ₹98 crore, plus a fund of funds (₹81 crore, a 0.10% Direct TER) that buys it. The ETF tracks the Nifty100 ESG Sector Leaders index. The ETF returned 6.03% a year over three years and 4.75% over five, against 6.68% and 5.49% for its index rebuilt the same way. We leave the fund of funds out of the asset total, since its money sits in the ETF.

What stands out

Most trail the broad market. Over three years, three of eight active funds beat the Nifty 500 TRI and the median was 7.93% a year, 1.8 points behind. Over five years two of eight beat it, with a median of 6.03%. Over one year two of nine did.

One fund is doing something different. quant ESG Integration returned 17.46% a year over three years, 7.4 points ahead of the next fund. It also reported portfolio turnover of 783%, against 18% to 115% for the other seven active funds that report it, and its R² against the Nifty 500 TRI is 0.74, where the other seven with three years sit between 0.90 and 0.95. Leave it out and the three-year range is 6.81% to 10.10%.

Exclusion is where the money is. The three exclusion funds hold ₹7,387 crore, 75% of the total, and SBI's alone holds 54%. Four integration funds hold ₹2,347 crore and the best-in-class funds ₹146 crore. None of the ten uses the impact, sustainable-objectives or transition strategies.

What they hold

On the 30 September 2026 portfolios, ICICI Bank and HDFC Bank are each held by eight of the ten active funds and by the ETF, at average weights of 7.98% and 6.29% where held. Infosys, Bajaj Finance and Tech Mahindra are in eight of these eleven portfolios, and Bharti Airtel in seven.

Banks are the largest industry in seven of the nine active funds whose disclosures tag industries (quant's does not), from 19.1% to 28.2% of the portfolio. Axis's fund leans most to finance companies (14.0%) and Quantum's to automobiles (16.9%).

The clearest difference between the index and the active funds is Reliance Industries. It is 9.56% of the ESG ETF and 8.25% of Axis's fund, a small holding in ICICI Prudential's and Kotak's, and absent from the other seven active funds.

How to read it

High R² means index-like. An R² of 0.90 or more says most of a fund's movement is explained by the broad market. The guide warns that a fund whose top names match the index's is close to an index fund with an active fee attached; the alpha and beta guide explains the test. These funds' Direct TERs run from 0.80% to 1.88%.

Short records, one regime. Nine of the ten launched in 2019 or later. Five years covers 2022, when, as the index post showed, the ESG index trailed the Nifty 100 by 7.9 points. A different five years could tell a different story.

The strategy name matters. An exclusion fund avoids a list of businesses; an integration fund weighs ESG scores alongside the usual analysis. They are different products under one label.

What the numbers do not tell you

Returns say nothing about whether a fund's companies are better corporate citizens. Holdings are a month-end snapshot. Expense ratios and assets are as disclosed to AMFI. Nothing here is a recommendation to buy or sell any fund, and past returns do not predict future ones. The NIFTY100 ESG P/E page tracks the index's valuation, and the SBI fund-house page lists the largest fund's siblings.