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Data-centric models will raise the effectiveness of ESG models and push sustainability agenda: Experts

The "Capturing the Essence of ESG in the Indian Market," webinar explored the market size of ESG funds in India, how can one invest in them, and how best-in-class data and analytics can drive performance, growth, and innovation for customers as well as for partners.

October 13, 2021 / 12:24 PM IST

The Environmental, Social and Governance (ESG) assets are growing steadily across the world. As per Refinitiv Lipper Funds data, the estimated ESG AUM will touch a whopping $50 trillion figure globally by 2025.

In India, the ESG market size is still quite nascent, but experts are bullish on its growth backed by environment-conscious investors and with companies in the financial services industry launching ESG funds and initiatives.

That said, India must navigate through several challenges arising from a dearth of consistency and comparability of ESG data due to a lack of standards on a global scale, to capture the ESG sentiment, accelerated by the COVID-19 pandemic.

Thus, to address challenges and churn out actionable solutions, Refinitiv, in collaboration with Moneycontrol, hosted the first episode of the Headwinds and Tailwinds: Navigating Indian Financial Markets.

The "Capturing the Essence of ESG in the Indian Market," webinar explored the market size of ESG funds in India, how can one invest in them, and how best-in-class data and analytics can drive performance, growth, and innovation for customers as well as for partners.

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Among the panellists were:
• Abhay Laijawala, MD & Fund Manager, Avendus Capital
• Harsha Upadhyay, Chief Investment Officer, Equity, President at Kotak Mahindra Asset Management Company Ltd.
• Akanksha Sharma, Global-Head ESG, Sterlite

• Deepak Khurana, Propositions Sales Director, Sustainable Finance & Lipper, the Asia Pacific at Refinitiv

ESG Investments: India vs the World

As compared to the rest of the world, India has only 22 ESG funds. Placing the country on the ESG world map, Deepak Khurana cited the United Nations Principle of Responsible Investment (UNPRI) framework, saying that the collective UNPRI signatory stood at almost a hundred trillion as of 31st March 2020.

He said, "There are around 3000 signatories, including SBI Funds Management, Axis Asset Management, NIPPON, etc. As of now, we have 12 signatories from India. There are close to around 10,000 ESG label funds worldwide, out of which 22 are here in India, and these funds collectively manage around USD 4.5 trillion."

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Delving into the same, Akanksha Sharma reiterated the rising interest in ESG in India. Meanwhile, she called for a robust collaboration between the public and private sectors for standardised and data-centric reporting.
“I think the social impact programs call for very high quantification of outcomes and impact, and that's where I believe moving to more data-centric implementation models. Newer financial models like impact investing and ESG bonds like social bonds, to some extent, also make this possible against the traditional models of pure philanthropy,” said Sharma.

Climate change and the transition to a green economy

As the world’s third largest emitter of greenhouse gases, India has its work cut out to adhere to its pledge of reducing emissions by 33-35% from 2005 levels by 2030 as per the Paris Climate accord. To pursue this goal, we would need a renewable energy capacity of 450 GW by 2030 by having 40% of its electric power capacity coming from non-fossil fuel sources.

The success this mission would depend in major part on renewable projects being able to generate reliable project financing by raising long-term structured debt. While globally, investors are flocking in to put their bets on sustainable ventures, India is striving hard to give the necessary push to debt markets in order to support and achieve its sustainable infrastructure goals and mitigate climate change impact. In significant developments, as per Refinitiv data, 58 out of 112 new Indian projects announced in 2021 are classified as renewable and overall, 555 out of 2155 active projects fall under that category.

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The pursuit of standardized ESG dataIn the 2021 study by Refinitiv on the state of ESG Disclosures by India Inc., the level of transparency in public disclosure of environmental, social and governance (ESG) strategies and performance data across 163 Indian companies as compared to other markets such as South Africa, Brazil, China and Hong Kong was analysed; and the overall ESG universe covered by Refinitiv and it was found that around 98% of Indian companies (Refinitiv® ESG coverage – 163 companies) publish sustainability reports. But only 41% of Indian companies (Refinitiv ESG coverage) publish sustainability reports in accordance with the GRI (Global Reporting Initiative) standards
In the absence of benchmarks for asset managers, individual asset management firms must focus on the materiality aspect of ESG since it is vast, and it may not be possible to look at over 400 variables. This arbitrary process is being tackled by SEBI's BRSR format, which is likely to set some benchmarks as the data comes from more than 1000 companies over the next few years.
Commenting on BRSR, Abhay Laijawala said, "More than the regulator, what we want to see from the companies is a voluntary assessment of their own ESG parameters. We have sustainability reports today, but they do not help at all. We need far more material, and we actually need a company to give out what is their ESG DNA and not just what they are doing."The panellists were optimistic that BRSR is a great equaliser in quantifying companies' disclosures and will set some common parameters that could make the practice right.

Harsha Upadhyay said, "Once the data becomes standardised across industries and companies due to BRSR, I think there will be competition among corporates to score well on that. The kind of money flow that you will see in the ESG funds will also be one of the key factors to nudge corporates to behave in the most responsible manner towards the environment, society, as well as governance."

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According to Refinitiv data,  ESG assets under management across the globe have grown at about 21% per annum since its inception in 2006. India can also bank upon the unique opportunity by making sustainability an integral part of the investment decision making process.

Watch the webinar on-demand.

This is a partnered post
Tags: #Features
first published: Oct 13, 2021 10:16 am

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