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Top 150 listed firms score well on ESG compliance: Care study

Our Bureau Chennai | Updated on October 21, 2021

‘No sustainability reporting by 40% of Nifty 500 cos

The top 150 listed companies by market capitalisation are reported to have done well on their ESG (Environmental, Social, and Governance) performance over the last year, according to an analysis by CARE Advisory, Research and Training Ltd (CARE Advisory). However, less than 40 per cent of the Nifty 500 companies have any form of sustainability reporting today, the report said.

Marked upswing

Given their focus on sustainability reporting and ESG metrics, the top 150 companies have shown marked improvement in their ESG performance. Applying materiality pertinent to these businesses reveal improved scores on ESG metrics around emissions, push towards renewable energy, diversity and inclusion and key governance issues such as independence of audit committees and better board functioning, the report pointed out.

Despite SEBI’s push on non-financial reporting through the business responsibility and sustainability reporting framework (BRSR) which will be mandatory by FY22-23, less than 40 per cent of the Nifty 500 companies have any form of sustainability reporting now.

Pain points

Some of the key pain points when it comes to conducting ESG assessments in India, is the lack of data, gaps in disclosures, issues in data quality and ad hoc reporting on environmental, social & governance parameters.

However, SEBI’s push towards compulsory non-financial reporting, for top 1000 listed entities, through the BRSR should tackle this to some extent. While the sands are slowly but surely shifting, driven by a realisation that an ESG orientation can potentially attract global capital, corporates would do well to make ESG as the bedrock of their business strategies.

Service sectors like IT and financials lead the way in terms of disclosures and their focus on ESG goals, largely due to their global presence and attractiveness for global capital, which calls for greater scrutiny from global investors.

In the manufacturing sector, industries like auto, steel and cement have shown a focus especially on the environment themes, with reduction in emission intensity and shift toward renewable power, thus seeing an improvement on ESG scores over the last two years. In fact, there is a shift of almost 10 per cent, on average, towards renewable power from conventional sources, for the top 150 listed entities.

Social theme

On social themes too, there has been an improvement over last year, with diversity and inclusion being a key theme that companies have embraced.

Sectors leading this agenda are IT, Financials, Real Estate and Communications, having a diversity of over 25 per cent in their workforce. At the board level too, over 60 per cent of the companies analysed have 2 or more women on the board, up from 55 per cent last year. Also evident is the move towards adoption of global best practices in governance, such as ensuring the independence of the board with a non-executive Chairman, and having an audit committee comprising of only independent directors. Even sectors like real estate, which are promoter run, have shown a stark improvement on these governance metrics, it said.

Published on October 21, 2021

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