Information technology and financial services players are the most environmental, Social, and governance (ESG) compliant companies in the country, and second-largest software exporter Infosys scoring the highest on the key metric, as per scores prepared by Crisil.
Companies in oil and gas, chemicals, metals and mining, and cement companies have lower ESG scores, reflecting high natural-resource intensity, and thereby higher emission levels, extractive use of natural resources, potential adverse environmental and community impact, and generally more moderate levels of disclosure, it said.
“ESG is already playing a material role in the decisions of governments, regulators, investors, lenders, and corporates. This will not only transform the investment management industry but also redefine corporate India''s approach to risk management for sustainable value creation,” Crisil''s managing director and chief executive Ashu Suyash said.
Scores for 225 companies computed by the rating agency's research wing pointed to scope for improvement on gender diversity as women's representation both on the boards and workforce remains low at 17 per cent, independent directors and reliance on renewable sources of power, among others.
Infosys tops the list, with a score of 79 on 100, while among the financial sector players, Kotak Mahindra Bank has a score of 75. There are many IT companies and also financial sector companies having an overall ESG score in the 70s.
“Our assessment is based on quantitative and qualitative disclosures of companies. As this is an objective evaluation based on publicly available information, the quality of disclosures made is an important determinant of the overall score,” its chief operating officer Amish Mehta said.
Data availability is expected to improve as the Business Responsibility and Sustainability Reporting becomes mandatory for Indian companies. And, as disclosures and benchmarks evolve, he added.
As disclosures and benchmarks evolve, CRISIL will continue to fine-tune its approach and methodology to provide the most relevant ESG scores, he said.
The scores computed for three cycles till the financial year 2019-20 revealed that independent director representation on boards, a tenet of corporate governance crucial for protecting the interests of all stakeholders, is also modest at 47 per cent with nearly 12 per cent of companies having less than one-third of independent directors.
The proportion of renewable energy in the consumption mix – an important environment score assessment parameter remains low at 14 per cent on an average, it said.Gender diversity at the board level and in the workforce of companies assessed remains low at 17 per cent and 13 per cent, respectively, it said.