India's leading asset management companies (AMCs), collectively overseeing more than 80% of the nation's mutual fund assets, have once again scored zero on climate scenario analysis and stress testing. This marks the second consecutive year without improvement, according to the latest “Risking Alpha” report by Climate Risk Horizons (CRH), released on October 30, 2026.
The findings highlight a significant gap in how major Indian mutual fund houses assess and disclose the climate-related financial risks within their portfolios, directly impacting investor exposure. While some progress has been noted in other areas, the core issue of climate risk integration remains unaddressed by the industry's biggest players.
Improvements in Governance and Disclosure
Despite the critical failing in climate risk analysis, the report indicates broad improvements across the industry. Ten out of the 12 fund houses assessed raised their overall scores this year, even with stricter evaluation criteria. The number of AMCs scoring 10 or more out of 20 increased from three to seven.
Most of these gains are attributed to stronger board oversight, enhanced stewardship practices, and better Business Responsibility and Sustainability Reporting (BRSR) disclosures. These improvements align with clearer regulatory expectations set by SEBI, India’s market regulator.
- All 12 fund houses now possess a stewardship code and a voting policy.
- Eleven have at least a basic responsible investment or ESG screening policy in place.
- Nine are full members of global responsible investment initiatives.
UTI Asset Management Company led the rankings with 12 points, an increase from 9 last year, recognized for its robust disclosures on ESG integration, governance, stewardship, and operational emissions. SBI Funds Management followed with 11 points, while ICICI Prudential, HDFC, Nippon Life India, Kotak Mahindra, and DSP each secured 10 points.
The Persistent Coal Policy Gap
The clearest and most concerning gap identified by the “Risking Alpha” report is the absence of comprehensive coal policies. None of the 12 fund houses publicly disclose a coal policy that applies consistently across all their funds. Furthermore, the only existing coal exclusion applies to a single ESG scheme, without specifying its scope or thresholds, making it difficult for investors to ascertain its effectiveness.
This lack of clear policy is particularly problematic given that SEBI’s ESG fund framework currently places no limits on fossil-fuel exposure in ESG-labelled funds. Consequently, some of these schemes continue to hold investments in companies with substantial coal-related activities, despite their “ESG” designation. Investors lack transparent information to determine if these holdings are consistent with the fund’s stated sustainability strategy.
“SEBI has built an important architecture around ESG strategy classification, BRSR and assurance, which have substantially improved transparency and reduced the scope for an ESG label to mean almost anything but greater specificity is needed in how ESG funds define and disclose their exclusion criteria and thresholds,” said Sneha Yadav, Climate Risk Horizons’ Sustainable Finance Analyst and author of the report.
The report underscores the urgent need for greater specificity and transparency from mutual funds regarding their climate risk assessments and exclusion criteria, especially concerning high-carbon assets like coal, to truly safeguard investor interests in a changing climate.