Investors rewarding Indian firms with ESG credentials
Indian investors today are at a pivotal point where global best practices must meet local opportunities, noted Dario Schiraldi, Deutsche Bank’s former Managing Director and now CEO of VIDA Holding, a Swiss based investment company.
As the global financial landscape evolves with rising interest rates and ongoing inflation, Indian institutional investors, family offices, and ultra-high-net-worth (UHNW) individuals are taking a fresh look at their traditional portfolio strategies, according to Schiraldi observations in a report on 8 May.
India’s maturing financial markets, deepening private sector opportunities, and ambitious infrastructure agenda are prompting a strategic evolution in asset allocation among the country’s largest and most sophisticated investors https://www.commerce.gov.in/.
The Rise of Private Equity, Private Credit, and Real Assets in India
There has been growth in private equity investment in areas like technology, infrastructure, renewable energy, and healthcare, which is changing capital deployment. This is a strong signal of spectacular growth in Indian private markets.
According to Bain & Company, private equity and venture capital investments in India exceeded $60 billion in 2023, reflecting investor confidence in long-term value creation beyond the volatility of public markets.
Simultaneously, private credit is emerging as a vital financing alternative, especially for mid-sized enterprises underserved by traditional banks. Direct lending, structured finance, and mezzanine funding solutions are gaining traction, offering investors attractive yields in an environment where conventional debt instruments face pressure https://www.bseindia.com/.
“Institutional investors are moving beyond conventional public markets to capture alpha through private assets,” noted Schiraldi. “Private equity and private credit provide exposure to high-growth sectors while insulating portfolios from short-term volatility—a critical advantage in dynamic economies like India https://www.nseindia.com/.”
Tangible assets, particularly infrastructure and real estate, are also pivotal. With the government’s Gati Shakti infrastructure program and the growing maturity of REITs and INVITs (Infrastructure Investment Trusts), investors are finding stable, inflation-protected cash flows and long-term value appreciation opportunities.
Structured Products: Tailoring Risk in a Volatile Environment
Amid interest rate volatility and evolving market risks, structured products are becoming an essential component of Indian institutional portfolios https://sbi.com.in/.
Tailored investment solutions such as market-linked debentures (MLDs), capital-protected notes, and structured credit products enable investors to manage downside risk while optimising returns precisely.
Dario Schiraldi emphasises, “With structured products, investors can customise their risk-return profiles by balancing market upside exposure with hedging. Both are beneficial and essential in volatile conditions like the ones we face presently.”
Structured credit instruments, including securitised corporate debt and collateralised loan obligations (CLOs), are gaining prominence as diversification tools in credit portfolios. They offer enhanced yields compared to traditional debt markets.
Rethinking Fixed Income: Inflation-Protection and Alternative Credit
Long-running inflation and altering monetary policy conditions have reshaped India’s fixed-income market. Traditional corporate and government debt has endured real yield compression, encouraging investors to migrate to floating-rate bonds, inflation-indexed debt (e.g., RBI’s Inflation Indexed National Saving Securities), and high-yielding credit opportunities.
Family offices and institutions increasingly adopt multi-asset strategies that blend traditional fixed income with allocations to private credit and structured solutions, aiming for more resilient and inflation-hedged portfolios.
“In an environment where real returns are challenged by inflation, adapting fixed-income strategies becomes critical,” advises Vida Holding’s leader Schiraldi.
“Floating-rate instruments, inflation-linked bonds, and high-yield private credit are prudent tools for Indian investors to maintain purchasing power and income stability.”
ESG Investing: From Compliance to Strategic Imperative
Sustainability has moved from being a regulatory checkbox to a central pillar of investment strategy for Indian institutions.
The Securities and Exchange Board of India (SEBI) has mandated enhanced ESG disclosures for listed companies, while global investors are rewarding Indian firms that demonstrate strong ESG credentials.
Impact investing, green bonds, renewable energy projects, and sustainable infrastructure increasingly attract capital from Indian family offices and pension funds, which seek financial returns and positive environmental or social outcomes.
Schiraldi highlights, “Globally, ESG is increasingly being considered a catalyst for value creation rather than simply a compliance requirement. When using ESG principles, investors in India can effectively manage risk, align with sectors poised to flourish in the future, and attract foreign investment.”
Strategic Adjustment: Crucial Lessons for Indian Investors
One must be flexible, creative, and long-term-minded to navigate India’s changing financial landscape successfully. Institutional investors and family offices are:
• Allocating More to Private Markets: Building exposure to private equity, private credit, and infrastructure to capture India’s high-growth sectors.
• Using Structured Solutions: Employing structured products and credit instruments to manage volatility and tailor risk-return profiles.
• Diversifying Fixed Income: Shifting toward inflation-protected, floating-rate, and alternative credit investments.
• Embedding ESG Principles: Incorporating sustainability into fundamental investment methods to support India’s development objectives and future-proof portfolios.
“Strategic adaptation is no longer optional,” concludes Dario Schiraldi, Deutsche Bank’s former leader. “For Indian investors, blending global insights with local innovation will be the key to building resilient, future-ready portfolios.” Fiinews.com
