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March 22, 2007
ABN AMRO Asset Management Launches First Indian SRI Mutual Fund
    by Anne Moore Odell

New fund focuses on companies screened by Indian research and ratings company CRISIL.


With the launch of the Indian Sustainable Development Fund, ABN AMRO Asset Management opens up a new emerging market for socially responsible investors. ABN AMRO, based in The Netherlands, is adding the Indian fund after its success with its emerging markets funds focused on Brazil and China. The formidable task for the India SRI fund is finding companies that meet global standards for environmental, social and corporate governance (ESG) issues.

ABN AMRO claims this is the first broadly-screened Indian SRI mutual fund. Work is being done by CRISIL, an Indian based research and ratings company, and Boston-based KLD Research & Analytics to systematically evaluate Indian companies. A consortium composed of CRISIL, S&P and KLD Research & Analytics has recently won a mandate from International Finance Corporation (IFC) in Washington, DC to create an ESG-based index of leading Indian firms. The consortium is planning to launch this index toward the end of this calendar year.

The Association for Sustainable and Responsible Investment in Asia (ASrIA), a non-profit that works to promote SRI in Asia, has been following the development of mutual funds in India and surrounding countries. Melissa Brown, ASrIAís Executive Director, told Socialfunds.com, "A number of Indian companies are working on their sustainability profiles. By Asian standards, Indian management teams have a high comfort level in talking about the issues thanks to a strong civil society tradition."

"The question will be how quickly can they develop the strategies and systems necessary to demonstrate performance," Brown added.

ABN AMRO Asset Management plans to put 65% of the Fundís assets in screened companies, and the remainder in other stocks, debt and money market instruments. The Fund is structured as a three-year close ended equity fund with an automatic conversion to an open-ended scheme after the three years are over. Long-term capital growth is the Fundís investment objective, using an actively managed portfolio of SRI companies focusing on sustainable development. They offer the regular plan with growth and dividend options.

Working with CRISIL, whose majority shareholder is Standard and Poorís (S&P), ABN AMRO is choosing which companies to include in the Indian Sustainable Development Fund. CRISIL has selected 245 companies from the S&P CNX 500 based on the companiesí ESG practices. The S&P CNX 500 is a broad-based equity index covering the Indian capital market.

CRISIL is using two screens to cull the S&P CNX 500 for ABN AMRO. They have created one set of questions on corporate governance and another set of questions that deal with social and environmental issues. CRISIL then checks if the S&P CNX 500 company has made any public disclosures on these issues.

Sunil Kumar Sinha, Head and Senior Economist at CRISIL explained, "For assessing Indian companies we have developed an ESG (Environment, Social and Governance) screen/template which is based on global benchmarks. For example, our screen on governance takes into account OECD global guidelines. Similarly, the environment and social screen takes into account Global Reporting Initiative, ILO labor and employment convention, Kyoto Protocol, etc."

"The reason why we don't have more SRI emerging markets funds is the lack of data, so we have to focus on transparency and disclosures from the company," David Morrow said, Global Specialist in SRI for ABN AMRO.

CRISIL plans to evaluate the S&P CNX 500 on a yearly basis to identify SRI companies in India. ABN AMRO Asset Management will further reduce the list created by CRISIL as it applies its own financial analysis.

Presently ABN AMRO Asset Management offers 24 country-specific SRI funds with nearly EUR 2 billion of assets under management. Started in 2001, the Brazil Fund has $50 million in assets.

 

 
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