Will Ahimsa Investing Take Off?

A few months ago, India’s top two bourses launched indices that tracked companies based a new ethical framework. The Bombay Stock Exchange (BSE) introduced its Saatvik 100 Index, which monitors stocks that align with ‘Sattvik’ principles, followed soon after by the National Stock Exchange’s (NSE) Nifty500 Ahimsa Index that tracks companies based on the principle of Ahimsa.

Ethical investing isn’t a new phenomenon. Environmental, Social and Governance investing – where companies are screened for their climate policies, human rights and fair management – and Sharia or halal investing – where businesses involved in alcohol, gambling, conventional banking and other prohibited activities are avoided – have been around for a while. But these new indices track companies that stay clear of businesses engaged in activities harmful to animals or those that deal addictive substances like tobacco and alcohol. There have been investors, especially from the Jain community, who have been guided by such an investing philosophy. But these had so far been at an informal and individual level.

Ahimsagain Foundation, a non-profit that champions this form of investing, collaborated with the NSE to introduce the Nifty500 Ahimsa Index. The exchange borrows the foundation’s Ahimsa Investment Movement (AIM) framework, which categorises companies into green, orange and red bands, with those in the green band signifying full compliance, and those in the red band signalling the least. NSE’s Ahimsa Index, however, features only those in the green band.

Atul Doshi from the Ahimsagain Foundation talks about this new form of investing and efforts to popularize it.

Excerpts from an interview:

How did the Ahimsa Investment Movement [AIM] start?

There is a Pune-based NGO working for animal welfare called Beauty Without Cruelty. They used to publish an investment guide every year, a very detailed classification of companies [based on how much harm, if at all, they caused harm to animals] in green, orange, grey and red categories. I, and others like me, had been following this and organising our personal portfolios around it. But they stopped publishing it around 2015 or 2016.

So, me and two other colleagues who were following the guide thought of starting the AIM initiative. We met other like-minded people and began.

How do you go about it?

First and foremost, we try to research a company’s activities. We classify companies into three categories – green, orange and red. Companies which are doing business that directly harm animals or are harmful to humans for instance those who sell tobacco or cigarettes, we put them in the red category. Meat companies, dairy companies, pharma companies (because of animal testing and use of animal ingredients), non-veg food companies, defense companies, etc., all of these go into the red category. Companies like banks and financial institutions that provide indirect capital or indirect support to such businesses [in the red category], we put them in the orange category.

The rest, like mobile companies, advertisement companies, telecom companies, go into the green category. But frankly, if you look at it microscopically, then you will probably not be able to find even a single company that you can truly call truly green. Because somewhere or the other there is some ahimsa involved. Even in our day-to-day life, whatever we do, there will always be some harm to some other being. The idea here is to try to minimise that harm.

How do you plan on popularising this concept?

We want to get financial institutions like mutual funds to offer some products based on these principles. That’s why you can’t make the criteria [when assessing the harm a company causes according to AIM] too strict. Or else there will not be any company that one can invest in.

So right now, the whole aim is also to encourage the financial industry to offer products around this theme. Right now, we have [classified] more than 1,000 companies. I think around 70 percent of these are in the green category. A few are in the orange category and a few in the red.

Maybe later, we can come out with stricter norms. So, this is what we are doing for now. We are talking to HDFC Mutual Fund, which is like the biggest mutual fund. Meanwhile, there is mutual fund called the Quantum Mutual Fund which has launched an ethical scheme on its own. Earlier, they were benchmarking it against the Sharia index. When we came to know of it, we met and talked to them, and they have also aligned the scheme to our Ahimsa norms. We requested them to add filters like dairy, meat, defense, etc. So, now it complies with both Sharia as well as Ahimsa principles. There is also The Wealth Company Mutual Fund, which is a new ethical mutual fund. HDFC has also started an ethical portfolio management scheme (PMS). PMS is meant for high-net-worth individuals, where the minimum investment is Rs 50 lakh. And then there is the BSE which launched its Satvik Index.

Please talk about what led NSE to introduce the Ahimsa Index?

We were talking to NSE for more than 1.5 years. Their Ahimsa Index is fully compliant with Ahimsa. They have only allowed companies in the green category. So even banks which would be in the orange category are not there. The index is a kind of broad indication. We hope that some kind of index-based product like features options or ETFs (exchange-traded funds) or other mutual funds based on this index will now be launched.

How have people responded to the index?

People have now started talking about this kind of ethical investing. Someone recently correctly mentioned that a company, say if it was compliant with Ahimsa norms, its cost of capital could be made lower like what happens for ESG companies. So if companies into ethical businesses get funds at a competitive or lower price, this can prove to be an advantage for them. Slowly, somewhere down the line, it may even be possible that a tobacco or liquor company get forced to scale down or they may not get additional capital.

We are completely religiously neutral, and open to any caste and creed. But communities like Jains and Marwaris are huge in the investment fraternity. So [if they start investing according to Ahimsa norms,] they can create huge implications for companies which are into non-ethical businesses.

We will never launch any financial product ourselves. We will not do any profit-making activity. We will not recommend that you buy this product or that product. We will just desire the product offering be an ethical product. It is up to you to subscribe, not to subscribe, or which to subscribe to. For us, it is all about creating awareness.

Do the stocks of such ethical companies perform well?

The BSE and the NSE have done back calculations and have found that the Ahimsa Index actually outperforms the normal index. This is something that has been mine and our colleagues’ experience too. Hypothetically, out of 1,000 scrips, even if you do not invest in 700 of them, the remaining 300 or 400 are still very good and capable of making very good money. In any case, right now out of the 1,000 or so companies [in our index], 70 percent is green.

Do you invest this way too?

My investment journey began about 25-30 years ago. But I started investing this way about 10 to 12 years back. I had become a vegan then. When you turn a vegan, you start believing in Ahimsa. Then you try to adopt more and more of its philosophy into your life. I started looking at Ahimsa as a principle. Then I came to know about the investment guide by Beauty Without Cruelty. Slowly as you become aware, you start studying it more deeply and accepting it.

Do you think this concept will catch on?

Yes. More people will start investing along these lines. Especially once people realise that when you invest this way there is no harm on a professional or commercial level. On the plus side, you are doing something good.

NSE’s Ahimsa Index may not have business that directly cause harm to animals. But it still has plenty of companies like those that are into automobiles, manufacturing, etc, all of which through emissions, mining and manufacturing contribute to environmental harm and habitat loss.

We generally look at what percentage of revenue comes from activities that are harmful. There may be entertainment companies or tourism companies for instance that offer non-veg food, but that might constitute no more than one or two percent of its revenue. But if it is a non-veg company or big hotel chain offers liquor, non-veg food, cigarettes, then we will put them into the red category.

What about companies, for instance, that are involved in mining?

Frankly, we didn’t focus much on it. We allowed it in the green segment because otherwise it would have been very difficult to come up with credible companies to invest in.

Is this something you will look at more strictly in the future?

Yes. We may come out with something like a Super Ahima or Pure Ahimsa. If there is someone who wants a very strict portfolio, we can come out with such kind of indexes too.