Key facts
- Motilal Oswal has launched India's first passive fund focused on the clean economy.
- The fund tracks the BSE Clean Environment Index, which comprises 25 stocks.
- Investment themes include renewables, electric vehicles, water treatment, recycling, and waste management.
- Unlike ESG funds, this index focuses on what companies do rather than how they operate.
- The New Fund Offer (NFO) for the Motilal Oswal BSE Clean Environment Index Fund closes on June 19.
Motilal Oswal Asset Management Company has launched India's first passive fund dedicated to the clean economy, aiming to provide investors with a transparent and rules-based approach to investing in environmental solutions. The Motilal Oswal BSE Clean Environment Index Fund, with its New Fund Offer closing on June 19, focuses on five key structural themes: renewable energy, electric vehicles (EVs), water treatment, recycling, and waste management.
Unlike traditional ESG (Environmental, Social, and Governance) funds that often screen companies based on their operational practices, this fund targets businesses whose products and services directly contribute to solving environmental challenges. Pratik Oswal, Chief of Passive Business at Motilal Oswal AMC, explained that ESG can be subjective and often results in portfolios similar to broad market indices. In contrast, the Clean Environment Index is a growth-oriented thematic strategy designed to capture the transition towards a cleaner economy.
The opportunity in water treatment, waste management, and recycling is substantial, driven by infrastructure deficits and government initiatives. India treats only about 28% of its 72,000 MLD daily wastewater, with the market projected to grow to $18.6 billion by 2033. Similarly, the solid waste management market is expected to reach $10.4 billion by 2030, supported by urbanization and stricter regulations. The recycling sector, particularly e-waste and EV battery recycling, is also poised for significant growth.
While the index is concentrated with 25 stocks, Motilal Oswal plans to manage liquidity and tracking error through filters, infrequent rebalances, and disciplined trading practices. The company believes a passive strategy is better suited for nascent, fast-evolving sectors like the clean economy, allowing investors to participate in the broader ecosystem's growth without the uncertainty of picking individual winners.
Motilal Oswal aims to be a specialist in passive investing in India, focusing on innovation, education, and efficiency. The firm has grown its passive AUM to nearly ₹60,000 crore since 2019, offering a range of differentiated products beyond standard index funds.