Increased sustainability disclosures to give leg-up to ESG funds

The increased availability of sustainability data from listed companies is going to help environment, social and governance (ESG) investing gain traction in India.

Six out of ten domestic funds with an ESG mandate were launched in the financial year 2020-21 (FY21), noted the May 24 Kotak Securities Strategy report. These funds look at things beyond company profitability when making their investing decisions. The Securities and Exchange Board of India (Sebi) has asked companies to make more details available on sustainability practices that they follow. This is expected to help with their investment decisions.
 

“In May 2021, India’s capital market regulator Sebi released guidelines for Business Responsibility and Sustainability Reporting (BRSR). The new format is voluntary in FY2022 mandatory from FY2023 for the top 1,000 listed companies by market cap. It will enable businesses to engage more meaningfully with stakeholders and encourage them to go beyond financial parameters and report on environmental and social aspects of their operations,” noted report authors Sandeep Gupta and Umesh Jain.
 

This comes even as India’s sustainability practices have been poor in comparison with the rest of the world, according to United Nation’s data.
 

“At #117, India ranks relatively low on sustainability amongst 193 UN members but we are encouraged by the recent trend of key stakeholders in India-government, companies and investors–exploring ESG for long-term sustainability. Four out of every five Nifty-50 companies are voluntarily making public their ESG compliance data while many more have begun building ESG into their operations,” said the report.