GOVERNANCE | INDIA | OCTOBER 31, 2026 – India’s mutual fund industry faces a significant climate-risk assessment gap, according to the latest report from Climate Risk Horizons (CRH). The organisation’s second Risking Alpha assessment, released on October 30, 2026, found that all 12 asset management companies (AMCs) covered by the study scored zero for climate scenario analysis and stress testing.
- What Does the Risking Alpha Report Assess?
- UTI Asset Management Leads the Overall Scores
- Three Climate-Risk Gaps Remain Unresolved
- 1. Financed Emissions Remain Undisclosed
- 2. Climate Scenario Analysis Is Missing
- 3. Coal Investment Restrictions Are Limited
- Why Climate Risk Matters to Mutual Fund Investors
- What the Findings Mean for SEBI and ESG Disclosure
- Key Findings at a Glance
- The Road Ahead for India’s Mutual Fund Industry
The findings are particularly significant because these fund houses collectively manage more than 80% of India’s domestic mutual fund assets, according to the report.
Although several AMCs have made progress in areas such as governance policies and sustainability disclosures, the assessment highlights a persistent weakness: the absence of publicly reported analysis showing how different climate scenarios could affect their investment portfolios.
The findings raise questions about how effectively India’s largest fund managers are identifying and assessing financial risks associated with climate change.
What Does the Risking Alpha Report Assess?
The Risking Alpha II report evaluates the climate-risk preparedness of 12 major Indian mutual fund houses using a scorecard with a maximum of 20 points.
Its assessment covers four broad areas:
- Governance and oversight: How climate-related risks are incorporated into leadership responsibilities and decision-making.
- Climate policies: Whether investment policies address climate-related concerns, including exposure to coal.
- Scenario analysis and stress testing: Whether asset managers assess how portfolios could perform under different climate and energy-transition pathways.
- Emissions disclosure: Whether fund houses report greenhouse gas emissions associated with their investment portfolios, including financed emissions.
The report draws on principles associated with international climate-risk frameworks and emissions-accounting approaches, including work by the Network for Greening the Financial System (NGFS), the International Energy Agency (IEA), the Intergovernmental Panel on Climate Change (IPCC) and the Partnership for Carbon Accounting Financials (PCAF).
These areas serve different purposes. Governance establishes responsibility, policies guide investment decisions, emissions reporting measures portfolio-related emissions, and scenario analysis examines how potential future conditions could affect financial performance.
The report’s central concern is that improvements in some of these areas have not translated into publicly demonstrated climate stress-testing capabilities.
UTI Asset Management Leads the Overall Scores
While every AMC assessed received zero for climate scenario analysis and stress testing, the report identified differences in overall performance.
UTI Asset Management recorded the highest overall score, at 12 out of 20. SBI Funds Management followed with 11 points.
ICICI Prudential Asset Management, HDFC Asset Management, Nippon Life India Asset Management, Kotak Mahindra Asset Management and DSP Asset Managers each received 10 points.
According to CRH, 10 of the 12 fund houses improved their raw scores compared with the first edition of the assessment.
However, the 2026 edition applied a stricter scoring methodology. As a result, higher raw scores do not necessarily indicate that the firms have reached an adequate level of climate-risk preparedness.
The distinction matters: a fund manager can improve its policies or disclosures while still lacking the analytical tools needed to evaluate how climate change could affect investment decisions.
Three Climate-Risk Gaps Remain Unresolved
The report highlights three persistent weaknesses in the climate-risk practices of the assessed AMCs.
1. Financed Emissions Remain Undisclosed
CRH found that none of the 12 AMCs publicly disclosed financed emissions from their investment portfolios under the report’s assessment.
Financed emissions are the greenhouse gas emissions associated with the companies and activities supported by an institution’s investments. For asset managers, these disclosures can help investors understand the emissions profile of the underlying holdings.
The PCAF framework provides a methodology for measuring and reporting financed emissions across different asset classes.
The report also noted that three AMCs disclosed their own operational emissions, such as those associated with office energy consumption and business travel.
However, an organisation’s operational footprint provides only a partial picture of its wider climate exposure. Portfolio-level information is needed to assess the emissions associated with the businesses and assets in which its funds invest.
2. Climate Scenario Analysis Is Missing
All 12 AMCs scored zero in the report’s climate scenario analysis and stress-testing category for the second consecutive year.
Climate scenario analysis examines how different possible futures could affect investments. These scenarios may consider stronger climate policies, rapid adoption of low-carbon technologies, changing energy demand, physical climate hazards or different global warming pathways.
For example, a fund with significant exposure to carbon-intensive industries could face financial risks if regulations tighten, demand shifts or new technologies make certain assets less competitive.
Physical risks also matter. Flooding, heat stress, water scarcity and other climate-related hazards can affect business operations, supply chains, insurance costs and asset values.
Stress testing cannot predict future market outcomes with certainty. It can, however, help asset managers identify vulnerabilities, compare potential outcomes and make more informed investment decisions.
Without such analysis, investors may have less visibility into how climate-related changes could affect portfolio risk and long-term returns.
3. Coal Investment Restrictions Are Limited
The report identified limited publicly disclosed restrictions on coal-related investments among the 12 fund houses.
According to CRH, Kotak Mahindra was the only AMC in the assessment to disclose a coal-related investment restriction. That restriction applied to one ESG-labelled scheme rather than the firm’s entire range of funds.
The report found no AMC-wide coal-exclusion or new-coal-financing policy among the assessed companies.
Coal exposure is an important consideration in climate-risk analysis because changes in regulation, technology, energy demand and financing conditions can affect the long-term economics of coal-related businesses.
The absence of broad restrictions does not, by itself, establish that every investment in coal carries the same level of risk. It does, however, highlight the importance of transparent policies and portfolio-level assessment.
Why Climate Risk Matters to Mutual Fund Investors
India’s mutual fund industry channels household savings into equity, debt and other financial assets. The way fund managers evaluate climate-related risks can therefore influence how these savings are allocated across the economy.
Climate change can affect investment performance through two broad categories of risk.
Physical climate risks arise from events and longer-term changes such as extreme heat, flooding, drought and water scarcity. These can disrupt production, damage infrastructure and increase operating costs.
Transition risks emerge as economies move towards lower-emissions systems. Policy changes, carbon costs, technological developments and shifts in consumer demand can affect companies differently depending on their business models and exposure to carbon-intensive activities.
These risks may influence company earnings, asset valuations, credit quality and long-term investment returns.
Climate stress testing can help asset managers explore these possibilities. It does not guarantee better returns or establish that a particular fund will suffer losses, but it can improve the quality of risk assessment when used alongside conventional financial analysis.
For investors, stronger climate-risk disclosure could provide additional information about how fund managers identify and manage emerging risks.
What the Findings Mean for SEBI and ESG Disclosure
The CRH report recommends stronger climate-risk practices across India’s asset management industry.
Its recommendations include requiring financed-emissions disclosure using the PCAF framework, developing climate transition plans across entire asset management companies rather than individual funds, introducing restrictions related to new coal capacity, and incorporating climate considerations into stewardship and voting policies.
These proposals would require asset managers to go beyond product-level ESG claims and demonstrate how climate-related risks are integrated into firm-wide investment processes.
For regulators, the challenge is to determine how disclosure requirements, measurement methodologies and governance expectations can improve transparency without creating inconsistent or misleading reporting.
The report’s findings should not be interpreted as proof that all 12 AMCs are violating existing regulations. A zero score under CRH’s assessment indicates that the relevant practice was not demonstrated under its methodology; it does not automatically establish a regulatory breach.
The distinction between a research assessment and a legal requirement is important for investors and asset managers alike.
Key Findings at a Glance
- 12 AMCs assessed: India’s largest fund houses included in the CRH report.
- More than 80%: The share of domestic mutual fund assets collectively managed by the assessed firms, according to CRH.
- Zero scores: All 12 AMCs scored zero for climate scenario analysis and stress testing.
- 12 out of 20: UTI Asset Management recorded the highest overall score.
- 11 out of 20: SBI Funds Management ranked second.
- 10 out of 12: AMCs improved their raw scores compared with the previous edition.
- No publicly disclosed financed emissions: None of the assessed AMCs met the report’s criterion for public portfolio-level financed-emissions disclosure.
The Road Ahead for India’s Mutual Fund Industry
The Risking Alpha II assessment highlights a gap between progress on selected sustainability measures and the ability to demonstrate how climate risks could affect investment portfolios.
As climate-related policies, technologies and physical hazards evolve, asset managers may face growing pressure from investors and other stakeholders to explain how these factors are incorporated into investment decisions.
More consistent emissions accounting, transparent climate policies and credible scenario analysis could help fund houses strengthen their risk-management practices.
For investors, the goal is not simply to identify which companies score highest on an ESG checklist. It is to obtain clearer information about how investment risks are assessed, what assumptions underpin that analysis and how the results influence portfolio decisions.
The central message from the report is clear: improving ESG disclosures is a useful step, but demonstrating how climate risks could affect investments remains a separate and important challenge for India’s mutual fund industry.
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