IT and financial companies score high on ESG factors: Crisil
IT services companies, including Infosys, Mindtree, Tata Consultancy Services and Tech Mahindra, lead the way in ESG (environmental, social and governance) factors, according to a new Crisil dashboard. India Cements, Vodafone Idea, Godfrey Philips, Sun Pharmaceuticals and Adani Gas are among the laggards, according to the ESG gauge launched by the analysis and rating company.
“Information technology (IT) and financial companies have relatively high overall ESG scores, given their inherently lower natural resource intensity, resulting in lower emissions, waste generation and consumption. of water. These companies also generate jobs and have relatively better disclosures, ”Crisil said in a statement.
“In contrast, oil and gas, chemical, metallurgical, mining and cement companies have lower ESG scores, reflecting high natural resource intensity, and therefore higher emission levels, extractive use of natural resources, impact negative environmental and community potential, and generally more moderate levels of disclosure, ”he added.
The ESG score takes into account the track records, trends and disclosure standards followed by 225 listed companies based on information available in the public domain, including third-party vendors. Scores are based on Crisil’s proprietary framework and assigned on a scale of 1 to 100, with 100 indicating best-in-class ESG performance. The current evaluation analyzes three cycles of annual reports up to FY2020.
Ashu Suyash, MD & CEO, Crisil said: “ESG already plays an important role in the decisions of governments, regulators, investors, lenders and businesses. This will not only transform the investment management industry, but also redefine Corporate India’s approach to risk management for sustainable value creation. Our survey shows that more than 80% of issuers and institutional investors intend to integrate ESG into their decision making.
Low gender diversity
According to the report, gender diversity at the board level and in the workforce of the rated companies remains low at 17 percent and 13 percent, respectively. The representation of independent directors, a principle of corporate governance crucial to protect the interests of all stakeholders, is also a modest 47 percent.
ESG investments on the rise
However, ESG investment decisions are accelerating. The total assets under management of the 10 Indian ESG funds stood at 10,473 crore as of March 31, 2021. It has grown more than fourfold in the past three years, due to the creation of several ESG funds during this period. period. In India, ESG is expected to grow by at least 15% per year, reaching over $ 60 billion by 2025. Durable bond issuance by Indian companies has grown rapidly in recent years. In 2020, nine companies had collectively raised $ 2.33 billion by issuing sustainable bonds, including green bonds.
“Investors and companies are in a privileged position to channel their investments in areas related to ESG and take advantage of the gaps in the current market. Companies that attempt to solve crises of the not-so-distant future will be rewarded with a competitive advantage. This could mean creating new products or launching services that meet emerging environmental and social needs or opening up currently unserved customer segments, ”the report says.