India’s mutual funds are not climate-ready, finds new report

India’s top 12 asset management companies (AMCs) are lagging in climate risk disclosure, emissions tracking, and sustainable investment, the report says

A new report by Climate Risk Horizons found that India’s top 12 asset management companies (AMCs) are falling short in addressing the financial risks posed by climate change—despite managing nearly ₹46 lakh crore in mutual fund assets

Titled Risking Alpha, the report analyses the climate preparedness of the 12 AMCs whose assets under management exceeded ₹1,00,000 crore consistently through FY 2023–24.  The study evaluated the AMCs across ten criteria—including Responsible Investment, Board Oversight, Coal Policies, ESG Integration, Stewardship, and Net Zero Targets.

The findings are unambiguous: while climate risks continue to grow, most AMCs are yet to reflect these in their investment decisions, disclosures, or risk management practices.

No stress tests, no targets

The report warns of both physical risks—such as extreme weather disrupting infrastructure and supply chains—and transition risks stemming from changing regulations, technology, and market sentiment. Yet, none of the AMCs assessed have conducted climate-related stress testing or scenario analysis of their portfolios. That’s despite the fact that many expect their investee companies to do exactly that.

Only Nippon Life India AMC has set emissions reduction targets for Scope 1 and 2 emissions, pegged to 2030, 2050, and 2070. No AMC has disclosed Scope 3 financed emissions—considered the most critical category for financial institutions. DSP has begun measuring them, and HDFC AMC reports on other Scope 3 categories, but most AMCs remain opaque.

Weak governance structures

Governance is another weak link. Just three of the 12 AMCs have board-level oversight on climate risks. Two others have ESG or sustainability committees, while the rest have no formal oversight structure in place. Without this, the report argues, climate risk is unlikely to influence investment decisions in any meaningful way.

Sustainability claims don’t always hold up

Even AMCs that offer ESG- or sustainability-themed funds aren’t always transparent. Of the eight AMCs that offer such products, three do not disclose their ESG scoring or methodology. The report raises concerns over greenwashing, pointing to the lack of standardisation and accountability.

Coal investments are a major blind spot. None of the AMCs have a stated policy to phase out coal. Kotak Mutual Fund is the only one to exclude fossil fuels—but only in one ESG-themed fund.

Stewardship in name, not practice

Active ownership—another lever AMCs can use to influence corporate behaviour—is rarely followed through. Most firms claim to follow stewardship codes, but eight AMCs didn’t vote on a single ESG or climate-related resolution last year. Only SBI Funds Management disclosed the ESG issues it engaged on with investee companies.

Hesitation to join global alliances

Membership in global responsible investment frameworks is also patchy. Seven AMCs are signatories to the UN Principles for Responsible Investment (UN PRI), and two more are in the process. However, Mirae Asset, Tata AMC and Bandhan AMC have yet to join, limiting their access to global best practices and technical guidance.

Urgent need for action and regulation

The report recommends that AMCs improve emissions disclosure, especially of Scope 3 financed emissions, and adopt concrete coal exclusion policies. It also calls for greater investment in sustainable finance products—not just to reduce risk, but to meet rising investor demand.

For regulators, the report lays out clear next steps. SEBI should create AMC-specific disclosure norms, enable more flexible ESG fund strategies, and align mutual fund classifications with India’s climate finance taxonomy announced in the Union Budget 2024–25.

India’s mutual fund industry is on track to double its assets to ₹100 lakh crore by 2030. Where this capital is invested—and how resilient it is to climate risks—will shape both the country’s financial future and its ability to meet climate goals. For now, the report concludes, India’s biggest asset managers are lagging behind.

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