India and it’s relation with ESG
ESG stands for environmental, social and governance of an enterprise. These are called pillars in ESG frameworks and represent the 3 main areas that companies are expected to report in.
A company’s financial performance has a positive relationship with ESG. Beyond the financial parameters: it also enhances the organization’s public image, making it an attractive investment destination and increasing access to ESG-focused capital.
The Securities and Exchange Board of India (SEBI) mandated the roll-out of new reporting standards for companies in May 2022.
Business Responsibility and Sustainability Report (BRSR) was introduced in 2021. BRSR reporting has been made voluntary for FY 2021-22 but will be mandatory from FY 2022-23.
India is also bringing new environmental rules to eliminate green washing requiring companies to submit detailed emissions data.
The government plans to compile information from the country’s top 1,000 companies starting April 1, 2023.
This may extend to unlisted companies in the future, which will push smaller firms to report on how they plan to mitigate or adapt to climate risks, along with describing the costs of those steps.
The establishment of the Central Banks and Financial Supervisors Network for Greening the Financial System (NGFS) and Sustainable Banking Network (SBN) has further supported the push towards sustainable financial practices.
In India the total assets under ESG have reached more than INR 12,000 crores and are growing at a rapid pace.
ESG and sustainable investing have gained more investor interest in the last two years. Seven of the nine ESG funds in India were launched after 2020.
India is also one of the few countries in the world to have a corporate social responsibility (CSR) mandate – companies with a net worth of Rs5 billion (US$61 million) or more (or turnover of Rs10 billion or more, or net profit of Rs50 million or more) are required to spend 2 per cent of their net profits on CSR initiatives.
India is coming up as a major market for sustainability solutions and green finance.
Indian companies are fast adopting ESG as part of their overall business strategy making India’s ESG ecosystem growing rapidly.
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