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EY ESG Leadership Dialogues

The COVID-19 pandemic has reinforced the motto of ‘people, planet and profit’ with investors putting their bets on companies with high ESG scores. It has been instrumental in reinforcing the importance of ESG framework as a key approach to long-term business resilience, says the EY report ‘Can ESG help future proof your business’. COVID has ensured there is greater focus on ESG – US data shows a record $27.7 billion flew into ESG ETFs in 2020, more than three times the previous year. Globally, trillions are flowing into sustainable funds, with ESG funds surpassing $1 trillion in assets, in 2020.

 

Indian companies are also doing well when it comes to environmental, social and governance (ESG) disclosures. In India the market regulator is pushing for more stringent ESG-related disclosures, amid rising investor interest. A series of efforts have been taken by the Indian Government, one of which requires spend of 2% of average net profits by India Inc. (certain eligible companies) towards corporate social responsibility (CSR) activities in eligible areas.

Need of the Hour

The Indian economy is going through a phase of uncertainty coupled by amplification of several natural and social disruptions making Indian companies rethink their business strategy. A look at how ESG creates value for corporates and their stakeholders: communities, customers, employees, governments, investors, regulators, and suppliers, is the need of the hour for all. At the moment, ESG may be in its nascent stage, however, with the shifting focus of the global economies’ to sustainable development, reducing carbon footprint, fulfilling beneficial social and environmental goals, it will make investors closely assess ESG and CSR factors in identifying their potential investments to have an impact.

ESG trends and way forward

ESG and CSR will act as potential tools to engage into meaningful conversations with the stakeholders and create value.

The number of Indian signatories to United Nations—Principles of Responsible Investment tripled in 2020, while the number of active ESG mutual funds now total eight. Source – EY report.

The growth of responsible investments is driven by several factors; from regulators, impacts on risk and return, and client demand.

The upcoming webinar “ESG as a value creator for India Inc.” will feature a panel of renowned business leaders from different sectors to explore how companies can identify and build the right value for their business with ESG as a tool.