WhiteOak MF Launches First ESG Standards Compliant MF Scheme

‘WhiteOak Capital ESG Best-in-class Strategy Fund’ is an open-ended equity scheme investing in companies following ESG theme adopting best-in-class strategy, said WhiteOak Capital Mutual Fund.

The new fund seeks to invest in companies with superior corporate governance practices. The fund seeks to derive returns for its clients by investing in high-quality businesses that have long-term sustainability of return on capital, potential scalability of the business, strong execution capability, and superior corporate governance culture, the fund house said in a release.

"The Fund will use a Sebi registered third-party, ESG Ratings Provider for Ratings Reports, and other research to aid the decision-making process."

Speaking on the fund launch, Aashish Somaiyaa, CEO, of WhiteOak Capital Asset Management, said, “In DCF (Discounted Cash Flow) models, typically more than 80 per cent of the value comes from the terminal value. Projecting growth into the future and assigning significant exit growth rates, multiples, and terminal value all assume sustainability and longevity of the business, which one suspects can't come at the cost of damaging the environment, disregarding societal imperatives, and short-changing minority shareholders. Poor ESG practices pose a risk to business longevity and hence reduce terminal value”.

“The fund will utilize its proprietary framework to assess companies on their corporate governance practices. Under this framework, companies are prominently assessed based on their accounting practices, alignment with minority shareholders’ interests, capital allocation, board strength, and compliance with the relevant laws and regulations,” said Ramesh Mantri, CIO of WhiteOak Capital Asset Management.

"Based on this assessment, companies are ranked internally between one to twelve, with companies with rank one being the most well-governed companies and companies with the twelfth rank being the least well-governed. The scheme will consider companies ranked first to fourth under its proprietary framework as its investment universe," WhiteOak MF said.

"Within the investment universe, the fund will invest in businesses with attributes such as superior returns on incremental capital, scalable long-term opportunity, strong execution, etc., which are available at an attractive valuation i.e. the current market price is at a substantial discount to intrinsic value. As per SEBI Guidelines, the Scheme shall only invest in securities that have Business Responsibility and Sustainability Report (BRSR) disclosures," the fund house said.

The fund portfolio allocation will include Equity & Equity related Instruments of companies following the Environment, Social, and Government (ESG) theme adopting Best-In-Class Strategy: 80 per cent -100 per cent, Equity & Equity related Instruments of other companies 0-20 per cent, debt securities and money market instruments-0-20 per cent and units issued by REITs and InvITs -0-10 per cent. Under the Best-In-Class strategy, the Scheme shall invest in companies and issuers that perform better than peers on one or more performance metrics related to ESG matters.