Abstract: In recent years, Environmental, Social, and Governance (ESG) investing has gained significant traction as investors increasingly prioritize ethical considerations alongside financial returns. This study investigates the impact of ESG criteria on mutual fund performance in the Indian financial market, with a focus on return, risk, and risk-adjusted metrics. Using secondary data from selected Indian ESG mutual funds, the study applies correlation and regression analysis to evaluate the relationship between ESG ratings and fund performance. The findings indicate a weak correlation between ESG ratings and short-term returns, but a strong positive correlation with long-term (3-year) returns. Regression analysis further suggests that higher ESG ratings are associated with improved risk-adjusted returns, as measured by the Sharpe Ratio. While no consistent linear relationship was found between ESG scores and risk indicators such as beta or standard deviation, ESG integration appears to contribute to more stable fund performance over time. This research provides empirical evidence supporting ESG investment as a sustainable and potentially rewarding strategy in the Indian context.

Keywords: ESG Investing, Mutual Funds, Fund Performance, Risk-Adjusted Returns, Sharpe Ratio, ESG Ratings, Sustainable Finance, Volatility, India, Ethical Investment

Downloads: | DOI: 10.17148/IARJSET.2026.133112