ESG – An Enabler of responsible business
ESG stands for Environmental, Social & Governance practices that are referred to when measuring the sustainability & ethical impact of a company or investment on the larger community. Large number of investors, companies & regulatory bodies are integrating ESG aspects into their business strategies, assessment models & regulations with the objective to better manage & assess risks beyond “conventional” business & financial performance.
ESG Risk exposure & performance both affect companies’ short- &long-term financial performance & business viability. A company with a strong ESG track record can attract investments from long term institutional investors particularly pension funds. Such funds have a strong voice in the international demand for enhanced ESG disclosure.
Corporate sustainability starts with a company’s value system and a principles-based approach to doing business. This means operating in ways that, at a minimum, meet fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption.
ESG integration is the explicit and systematic inclusion of ESG issues in investment analysis and investment decisions. It is the analysis of all material factors in investment analysis and investment decisions, including environmental, social, and governance (ESG).
USD 40 TN invested in ESG focused investments globally (% of AUM)
India’s ESG investment to increase to 30% by 2030
ESG rating has been accepted by the investor community as a very effective tool to identify companies aligned with their investment interests. Moreover, regulators, financial institutions, think tanks, etc. want to better understand & monitor companies & industries’ ESG performance & impact on sustainable development. Equally, companies increasingly integrate ESG practices in their corporate strategy & boards & leadership teams want to be able to compare their ESG performance to that of competitors.
ESGRisk.ai’s rating is an objective, independent and unbiased opinion on a company’s ability to mitigate future/emerging risks associated with Environment, Social, and Governance issues that have material financial impact based on publicly available data. Our ESG ratings foster informed decision-making when it comes to e.g. choosing ESG investments, assessing a particular companies or industries performance, reviewing ESG business strategies and identifying need for policy interventions.
To actively contribute to and be aligned with the worldwide ESG movement and policy dialogue, we are signatories of various global frameworks. Being a member of the GRI community, ESGRisk.ai actively contributes to advancing sustainability reporting. Acuité Ratings and Research Ltd together with ESGRisk.ai are also signatories to the UN Principles of Responsible Investment (PRI). Moreover, Acuité is the first credit rating agency from India to become a signatory of PRI’s ESG in Credit Risk and Ratings Statement in order to enhance the systematic and transparent consideration of financial material ESG factors in the assessment of creditworthiness.
“The Indian economy will be facing tremendous challenges over the next 10 years on environment, social and governance fronts. But it will also provide India with a great opportunity to be a role model in sustainable development. A robust ESG rating framework will help in creating economic incentives for adoption of ESG best practices by corporate India.”
“ESG Compliance will play a strategic role in influencing human capital management and labour governance of Indian companies. As the manufacturing and services sectors expand further to foreign markets, it will be pertinent to ensure that India Inc.’s employment standards and policies are aligned with global practices. ESG Rating will hence be a crucial tool that can establish necessary checks and empower Indian organizations to grow exponentially.”
“With a total asset under management (AUM) of over $40 trillion invested globally using some form of ESG compliance and India’s increasing integration with global markets our ESG Ratings will help investors incorporate ESG factors in their investment decisions. In India, only 7% of domestic AUM is invested in ESG funds at present and our internal estimates show this will grow to 30% in a decade. In this, around 75% of FII funds will be based on ESG themes. These figures clearly highlight the growing significance of Environmental, Social and Governance factors in investment decisions.”
“A very timely initiative by Acuité. India cannot achieve global prominence without ESG leadership and ESG ratings are critical for investors and customers to understand how our companies fare vis-à-vis their global peers.”
Why ESG strategy can accelerate ESG agenda Odisha is a hive of artistic activity, teeming with terracotta crafts, brass work, sand designs and hands skilled in making lip-smacking rosogollas. An episode in 2005 unleashed the other side of the otherwise affable people of this state. A South Korean steel-making company
Demand both: Investing responsibly and save the planet It is just bad framing of the notion of trade-off between choosing to save planet and trying to make more money. Just by making smart investment choices we don’t have to choose between the two. It is about identifying companies that are