The Economic Survey on Tuesday pointed out that Environment, Social, and Governance (ESG) performance of top Indian companies have helped in increasing access to capital at lower cost by building investor confidence.
The Survey noted that SEBI has been one of the early adopters of sustainability reporting for listed entities and requires mandatory ESG-related disclosures for the top 100 listed entities (by market capitalisation) since 2012.
Over the years, the requirement was strengthened to cover the top 500 and then the top 1,000 entities. The capital markets regulator also issued new sustainability reporting requirements, under the Business Responsibility and Sustainability Report (BRSR), which are more granular with quantifiable metrics in line with the principles ensconced in the ‘National Guidelines on Responsible Business Conduct’.
“The BRSR was made mandatory for the top 1,000 listed entities (by market capitalisation) from 2022–23. Early research shows that for top Indian firms, ESG performance reduced stock return volatility during Covid-19 and enabled firms to access capital at lower cost by building investors’ confidence, as ESG disclosures create long-term value for investors as well as reduce information asymmetry,” it noted.
According to SEBI data on green debt securities, between 2017 and September 2022, 15 Indian corporates issued green bonds worth ₹4,539 crore. Most of these are related to renewable energy generation, while one is slated to be used for the tertiary treatment of waste water, it said.
Green bonds
Green bonds, which generate funds for investing in environmentally sustainable and climate-suitable projects, are widely accepted as an instrument to raise finances to support climate and environmental projects and command a relatively lower cost of capital compared to regular bonds.
Quoting IMF data, the Survey said green bonds, valued at around $620 billion, were issued across the world in 2021, in which countries issued green bonds of value $587.7 billion and international organisations issued bonds of value $32.3 billion.
“The availability of adequate and affordable finance remains a constraint in India’s climate actions. The country has so far largely met its requirements from domestic sources only. Finance is a critical input for its climate actions. Therefore, the country has scaled up its efforts towards mobilising private capital, including through sovereign green bonds, to meet climate action goals. A framework for the latter has been issued in compliance with International Capital Market Association (ICMA) Green Bond Principles (2021),” it added.