Investment reports

Only a fifth of India Inc publishes sustainability reports in 2021, but ESG disclosures are gradually improving: CRISIL report

Climate change, poverty, inequality, hunger and many other global challenges continue to impede our journey towards a sustainable future. And companies play a crucial role in making or breaking the situation. In this respect, sustainable development or environmental, social and governance reporting (ESG) disclosures reflect how the private sector influences positive change.

Fortunately, India Inc’s ESG Ratings Continually Rise, Constrained by Improved Insights and Performance, Reports CRISISthe analysis of. Based on FY2021 data, a risk assessment of 586 Indian companies across 53 sectors shows that most of them improved their ESG ratings compared to the previous year, thanks to more important information and perform better on several factors.

Yet the fact remains that only a fifth of the 586 assessed companies published sustainability reports in 2021, the report says. This is an improvement, as 12 new companies published this information for the first time compared to last year.

During the 2022-23 fiscal year, the situation is expected to change dramatically as securities and exchange board”>Securities and Exchange Commission of India (SEBI) has made ESG disclosure mandatory for the top 1000 listed companies.

According to the CRISIL report, rising ESG scores are visible in renewable energy consumption, gender diversity and board independence. When the analytics firm compared this year’s data with the 225 companies analyzed last year, 14 showed a substantial positive deviation, more significant than a 5-point increase in score. However, three companies showed significant negative divergence with a drop of more than 5 points in the score, while 139 remained generally stable.

According to the firm’s most recent assessment, only 14 organizations fall under the “leadership” classification, while 108 were classified as “strong” and 73 in the “below average” and “weak” categories.

“ESG leaders have demonstrated a clear commitment to sustainability and have consistently delivered superior performance. For ESG to be truly embedded and practiced in spirit, all stakeholders need to work collaboratively and create an environment supportive of ESG in India,” says Mehta AmishManaging Director and CEO of CRISIL Ltd.

Globally, the environmental conversation has centered on greenhouse gas (GHG) emissions, as climate change remains a pressing risk for the business sector. However, only one in five companies in India have disclosed their Scopes 1 and 2 GHG emissions. The report found that Scope 3 emissions disclosure was worse: only 63 of 586 companies provided this information.

“In addition to a short-term focus on targeted actions such as decarbonization, a mindset shift is needed to move from simple compliance to value creation and structural risk mitigation,” adds Amish Mehta.

India is one of 80 percent of the world’s countries committed to Net-Zero and the investment required to achieve this will be substantial! It’s about minimizing GHG emissions over the next 50 years, which have quadrupled over the previous 20 years.

Over the next seven years, CRISIL estimates that India will need to invest Rs 22-25 lakh crore in decarbonization. This involves significant investment in renewable assets and battery technology.

Beyond 2030, investments will more than triple in hydrogen, CCUS, pumped hydro, geothermal and biomass technologies, where India’s potential is huge but mostly untapped, says The report.

In March 2022, 82 companies pledged to follow the net-zero emissions path, a 50% increase from 2019. According to the non-profit Climate Disclosure Project (CDP), India ranks sixth worldwide in this category.