A sudy conducted by CareEdge Research has found that Environmental, Social and Governance (ESG) reporting by Indian corporates has improved by 160 per cent. The research is an analysis of reports from top 1,000 listed entities over the past three fiscals.
A stark improvement in the ESG disclosures by companies was noted based on their business responsibility and sustainability Reports (BRSR). This further led to an upgrade in the ESG scores of these companies.
The improvement is a result of SEBI pushing for ESG disclosures, which has witnessed a number of companies putting up ESG data increase from a meagre 127 in FY2020 to 330 in FY2022. SEBI’s circular makes it mandatory for target companies to disclose sustainability data for FY23 onwards. In fact, 18 per cent of the target companies voluntarily disclosed the BRSR data in FY22.
Raising awareness
The energy and utilities sector saw close to 50 per cent companies reporting on ESG parameters. While the service sector entities have traditionally been robust in disclosing ESG data, the rising awareness among financial institutions in adopting ESG practices in their operations has further led to 41 per cent of the companies reporting ESG data in the last three fiscals.
Even as the aggregate score for the top 1,000 listed companies still hovers in the “average” grade category, companies who have been disclosing ESG data have seen their scores improve by almost 15 per cent over the past three fiscals.
Companies in materials sector have shown noteworthy improvement, with average ESG performance improving by ~20 per cent in the last three fiscal. This highlights how heavy emitting industries such as steel, cement and mining are gradually adopting green initiatives to align with their long-term ESG goals.
The utilities and energy sector too has witnessed notable improvement, signalling the sector’s transition towards long term ESG commitments along with a visible shift towards green energy resources. This also aligns with the government’s push on India’s own commitment to achieve net zero emissions by 2070.
According to Mehul Pandya, MD and CEO, CareEdge, “There has been a jump of 160 per cent in ESG reporting from FY20 to FY22 by Indian corporates, which is quite encouraging. Not only does this align with the Indian government’s focus on green growth, as emphasised in the latest Union Budget, but it also aids the country’s commitment towards achieving net zero by 2070. With market regulator SEBI’s circular on business responsibility and sustainability reports making ESG disclosures mandatory from FY23 for the top 1,000 listed entities, I believe there will be a further boost among Indian corporates to transition towards sustainable practices.”