Regulation Driving Enhanced Environmental Disclosures by Indian Companies
Climate change and greenhouse gas emissions are the most pressing environmental issues on the minds of asset managers in India, according to our recent report ‘Moving the Needle- Stewardship in India’. The country has committed to becoming net zero by 2070, slightly beyond the Paris Agreement’s deadline of 2050. However, due to the country’s growing economic needs, reliance on fossil fuels, particularly coal, will persist for longer to ensure energy security.
New regulation to move the needle
As a result, India ranks third globally in carbon emissions, following China and the USA. This fact has prompted the introduction of mandatory reporting for the top 1000 listed companies on environmental metrics, which is considered a significant step by Indian asset managers surveyed for this report.
This regulation is expected to enhance the transparency and accountability of companies in addressing environmental concerns. With standardised metrics mainly focused on environmental matters, asset managers anticipate greater engagement with corporates in setting and monitoring targets. This development addresses the lack of sufficient disclosure, hindering meaningful discussions on energy transition plans and other environmental initiatives.
Social Risks and Renewable Energy Transition
While government initiatives aim to increase the share of renewable energy in the overall energy mix, this transition poses an idiosyncratic social risk. The construction of renewable energy power projects often requires the displacement of people from agricultural land. This issue emerged repeatedly during interviews with asset managers. The report highlights the need to address this social risk alongside alleviating environmental risks.
The implementation of mandatory reporting for environmental metrics represents a crucial step towards better environmental disclosures from companies in India. As highlighted in the report, this regulatory initiative aims to enhance transparency and facilitate discussions on energy transition plans and environmental targets. While the transition to renewable energy poses social risks, addressing these challenges alongside environmental concerns is essential. By actively engaging with mandatory reporting and adopting sustainable practices, India can progress towards a more environmentally conscious and socially responsible future.
About ‘Moving the Needle’
Following the success of our reports on stewardship in China and South Africa, this latest edition, “Moving the Needle – Stewardship in India” focuses on stewardship practices among asset managers in India and their impact on the country’s capital markets. The report delves into the attitudes and practices providing valuable insights into asset managers’ commitment to responsible investing and incorporating environmental, social, and governance (ESG) factors into their investment decision making. It examines the progress and challenges faced in India’s stewardship landscape, presenting key findings and recommendations. The report is an essential resource for investors, asset managers, and industry professionals seeking to understand and navigate India’s evolving stewardship practices.
