SBI Funds ESG

Investment Strategy

SBI ESG Strategy is a market-cap agnostic (multi-cap) equity strategy spanning large, mid, and small-cap stocks. The strategy seeks to invest in companies that meet defined positive ESG standards while also being disproportionate beneficiaries of India’s economic growth, available at reasonable valuations. Stock selection is driven by a combination of ESG compliance, business quality, management capability, and valuation comfort.

Investment Philosophy

The philosophy of SBI ESG is to invest in good businesses run by high-quality management teams, while explicitly incorporating Environmental, Social, and Governance factors into the investment decision-making process. ESG is used both as a filter to eliminate unsuitable businesses and as a quality overlay to identify more sustainable long-term compounders.

Core Philosophy Pillars

• Management: Preference for companies with integrity, long-term vision, a proven execution track record, efficient capital allocation, and strong transparency and accountability.
• Business Quality: Focus on businesses with large opportunity size, strong return on capital, pricing power, appropriate capital intensity, and manageable disruption risk.
• Valuation: Investment decisions driven by intrinsic value using Discounted Cash Flow analysis, supplemented by relative valuation comparisons.

ESG Framework

ESG compliance is evaluated across all three pillars, with both positive inclusion criteria and exclusion-based screening.

• Environment (E): Climate change impact, carbon emissions, natural capital usage, water stress management, and adoption of renewable energy.
• Social (S): Human capital management, labour standards, product liability, customer privacy, and data security practices.
• Governance (G): Board independence, executive compensation, accounting quality, business ethics, and protection of minority shareholder interests.

Investment Process

The investment process follows a structured, multi-stage approach combining qualitative assessment, external validation, forensic checks, and valuation discipline.

• Qualitative Assessment: Evaluation of business model, macro-economic sensitivity, industry structure (Porter’s Five Forces), and engagement with sell-side research.
• External & Ground Analysis: Assessment of geopolitical impact, channel checks, management interactions, and site or plant visits where relevant.
• Forensic & Financial Analysis: Review of ROE, ROIC, earnings risk, debt servicing ability, and overall balance sheet quality.
• Investment Thesis & Valuation: Analysis of historical financials (typically 5 years), construction of valuation models, and formulation of a clear investment thesis.
• Investment Decision: Final inclusion based on target price upside, ESG fit, and portfolio-level diversification and conviction.

Portfolio Construction

Portfolio construction is driven by ESG-compliant stock selection, profitability, and sustainable growth characteristics, filtered through conviction and valuation comfort.

• Universe: ~330–340 companies under active research coverage and 220+ companies under passive coverage.
• ESG Filtering: Positive ESG screening combined with exclusion criteria to eliminate structurally weak businesses.
• SGVP Universe: Focus on stocks exhibiting profitable growth, capital efficiency, and sustainable long-term growth potential.
• Final Portfolio: Constructed based on opportunity size, valuation attractiveness, and portfolio manager conviction.

Suitable For

Investors seeking an ESG-integrated equity strategy backed by a large institutional platform, with an emphasis on business quality, governance, and long-term sustainability, rather than aggressive alpha generation.

PMS Background

As part of one of India’s largest mutual fund houses, SBI PMS benefits from the substantial research infrastructure, broker access, corporate relationships, and distribution strength of SBI Mutual Fund. While the parent AMC enjoys strong pedigree and scale in the mutual fund space, the PMS division remains an AMC-driven offering and is yet to establish strong standalone credentials. This is reflected in the relatively limited scale of its discretionary equity PMS assets and the absence of a distinct CIO-led identity typical of leading PMS platforms.

PMS Investment Philosophy

SBI PMS follows a structured, framework-driven investment philosophy centred around business quality, management assessment, and valuation discipline. The philosophy is process-oriented rather than personality-driven and avoids speculative or momentum-led approaches.

Core Philosophy Framework

• Business: Focus on companies with economic moats, large and scalable opportunity size, strong return on capital, pricing power, appropriate capital intensity, and manageable disruption risk.
• Management: Preference for management teams with integrity, proven execution capability, skin in the game, transparency, and accountability to shareholders.
• Valuation: Valuation-driven approach using Discounted Cash Flow methodologies, with emphasis on intrinsic value and relative valuation discipline, while explicitly avoiding “bigger fool” theories, market timing, or technical trading.

Investment Framework

SBI PMS employs a dual investment framework that balances absolute return objectives with relative return considerations, depending on market conditions and opportunity sets.

• Absolute Return Framework: Implemented through the BMV framework, focusing on business quality, management strength, and valuation comfort to generate absolute returns over a market cycle.
• Relative Return Framework: Incorporates incremental fundamental improvements, rising market expectations and momentum, and relative valuation comparisons to benchmark opportunities.

Suitable For

Not a recommended PMS provider for investors seeking a differentiated, CIO-driven, high-conviction discretionary equity PMS with strong standalone pedigree.