Quant ESG Integration Strategy Fund leads India’s ESG mutual fund category with a roughly 20.65% five-year CAGR, followed by Aditya Birla Sun Life ESG Integration Strategy Fund at around 11.55% and SBI ESG Exclusionary Strategy Fund near 10.47%, though past performance does not guarantee future returns. Comparing these funds on more than just returns — including AUM size, expense ratio, and screening methodology — matters before choosing where to invest.
Top ESG Mutual Funds by 5-Year Performance
Quant ESG Integration Strategy Fund Direct-Growth has delivered a five-year CAGR near 20.65%, the strongest among major India ESG funds, with a three-year CAGR around 17.9%. Aditya Birla Sun Life ESG Integration Strategy Fund Direct-Growth follows with roughly 11.55% over five years and about 13.95% over three years. SBI ESG Exclusionary Strategy Fund Direct Plan-Growth has returned close to 10.47% over five years. Several other funds, including those from Quantum and Axis, report five-year CAGRs in the 18-22% range, with AUM ranging from roughly ₹100 crore for smaller schemes to over ₹5,700 crore for the largest.
How These Funds Differ in Methodology
Not all ESG funds screen companies the same way, which explains why performance varies so widely across the category. Some funds use negative screening, excluding entire sectors like tobacco or thermal coal outright. Others use ESG integration, weighing sustainability scores alongside financial metrics without hard exclusions, which can result in a portfolio that looks closer to a conventional fund with a sustainability tilt. Before investing based on past returns alone, checking a fund’s actual screening methodology in its scheme information document reveals whether its ESG approach matches your expectations.
AUM and Liquidity Considerations
Fund size affects more than just credibility — smaller ESG funds with AUM under ₹200 crore can face liquidity constraints during periods of high redemption, while larger funds with AUM above ₹1,000 crore generally offer more stability and easier entry and exit. Larger funds also tend to have more resources dedicated to ESG research and engagement with portfolio companies, though this does not always translate into better returns, as the performance data above shows funds of varying sizes across the return spectrum.
Expense Ratios Matter More Than They Appear
ESG funds sometimes carry higher expense ratios than comparable conventional or index funds, since active ESG screening requires additional research resources. Over a long holding period, even a 0.5-1% difference in expense ratio compounds into a meaningful drag on net returns. Direct plans consistently carry lower expense ratios than regular plans across all ESG funds, making them the more cost-efficient entry point for investors comfortable managing their own fund selection without a distributor.
How to Choose the Right ESG Fund for You
Rather than chasing the single highest-CAGR fund, compare funds on a combination of consistent multi-year performance, AUM stability, expense ratio, and whether the screening methodology matches your personal sustainability priorities. Investors prioritising strict environmental exclusions may prefer a fund using hard sector exclusions, while those comfortable with a lighter integration approach may prioritise funds with stronger historical returns instead. Running your own comparison using our ESG Score Self-Assessment Tool alongside fund factsheets can help clarify which approach fits your goals.
How to Verify Fund Data Before Investing
Before investing based on published CAGR figures, verify the data directly through AMFI’s official mutual fund performance disclosures or the fund house’s factsheet, since third-party aggregator sites can sometimes show outdated or slightly inconsistent figures. Checking the fund’s portfolio turnover ratio alongside returns also matters, since high turnover can indicate a more actively traded, higher-cost strategy that may not sustain its historical performance. Reviewing at least three to five years of consistent data, rather than a single strong year, gives a more reliable picture of a fund’s actual risk-adjusted performance over time. The AMFI website publishes standardised, comparable data across all registered fund houses, making it the most reliable single source for cross-checking any performance figures quoted elsewhere.
Frequently Asked Questions
Which ESG mutual fund has performed best in India over five years?
Quant ESG Integration Strategy Fund has led the category with a roughly 20.65% five-year CAGR, though individual results vary and past performance is not guaranteed to continue.
Are direct plans better than regular plans for ESG funds?
Direct plans carry lower expense ratios than regular plans, which compounds into meaningfully higher net returns over a long holding period.
Do all ESG funds use the same screening approach?
No. Some use negative screening to exclude entire sectors, while others use ESG integration, weighing sustainability data alongside financial metrics without hard exclusions.
Is a larger ESG fund always a better choice?
Not necessarily for returns, but larger funds generally offer better liquidity and more resources for ESG research compared to smaller schemes.
For more on how ESG scoring works, read our guide on ESG ratings and scores, and for a broader look at the asset class, see ESG investing for beginners.
