- BSE launched Sattvic 100 Index for ethically aligned investing.
- Sattvic excludes alcohol, tobacco; Sharia avoids interest-based finance.
- ESG index considers environmental, social, governance performance scores.
Investing in India’s stock market is no longer only about generating returns. A growing number of investors are also seeking options that align with their personal beliefs and principles.
BSE Index Services has recently launched the Sattvic 100 Index. India already has two other thematic indices built around distinct screening approaches: ESG indices and Sharia indices.
While all three seek to filter companies using a defined framework, the criteria used by each are markedly different.
What Companies Does The Sattvic 100 Index Include?
The BSE Sattvic 100 Index selects 100 companies from the BSE 500 that follow Sattvic principles.
According to a fund house named Wealth Company, the screening process excludes companies linked to alcohol, tobacco, gambling, adult entertainment, narcotics, leather, meat and poultry, pesticides, and animal cruelty.
HDFC Bank has the highest weight in the index, followed by ICICI Bank and Reliance Industries. This means banking and financial services companies have not been excluded from the Sattvic 100 Index.
Sharia Index Excludes Banks And NBFCs
The NSE Nifty Sharia 25 Index selects companies in line with Islamic principles.
A key feature of the index is that it excludes companies involved in lending or borrowing money on interest. As a result, banks and non-banking financial companies have little to no presence in the index.
It also excludes companies associated with alcohol, gambling and pork-related businesses.
The Nifty Sharia 25 includes companies such as Hindustan Unilever, TCS, UltraTech Cement and HCL Technologies.
Companies are reviewed every month to assess whether they continue to meet the criteria, while the full index composition is reviewed twice a year.
ESG Index Uses Environmental, Social And Governance Scores
The BSE 100 ESG Index follows a different approach. It is not based on religious or moral principles.
Instead, it considers how well a company performs on environmental responsibility, social conduct and corporate governance.
The index includes BSE 100 companies whose ESG scores exceed a defined threshold. The score is assigned by an independent agency after assessing a company’s environmental approach, treatment of employees and the functioning of its board.
Unlike Sattvic and Sharia indices, the ESG index does not automatically exclude a particular business category. Companies are selected on the basis of their overall scores.
The Core Difference Between The Three Indices
The biggest difference lies in the basis for selection.
The Sattvic index screens companies on food, consumption and ethical considerations. The Sharia index applies Islamic financial principles, under which interest-based businesses are excluded. The ESG index assesses environmental, social and governance performance.
This is why a company such as HDFC Bank has the highest weight in the Sattvic 100 Index, while banks have no place in the Sharia index.
What It Means For Investors
Fund houses can use all three indices as benchmarks for exchange-traded funds, index funds and other schemes.
For investors who want their investments to reflect their beliefs as well as return expectations, the three indices offer different choices.
The Sattvic 100 Index is aimed at investors who place importance on food-related and ethical considerations. The Sharia index is for those who want to follow Islamic financial principles, while the ESG index is for investors who prioritise a company’s environmental and governance responsibilities.
However, there is currently no direct fund or ETF linked to the Sattvic 100 Index, which means investors will have to wait before they can invest in it directly.
