Is the concept of ESG relevant in India?

What is ESG?

The term Environmental, Social, and Governance (ESG) is gaining more relevance in India than ever before. It is criteria used to determine the company's concern towards the environment and also ensure they follow high governance standards.

  • Environmental criteria would be the disposal of waste in rivers, toxic emissions, use of plastics.
  • Social criteria can be the contribution towards the upbringing of the communities and have good CSR track records.
  • Governance criteria are having good ethical policies to avoid scandals that build trust with the customer.

ESG in India

India is the third-largest polluter in the world, just behind China and the United States. Three Indian cities list in the top polluted places on the planet. The quality of drinking water and the air is really poor has affected the health of every Indian. 

The term sustainability is attracting a lot of people, where the customer is turning conscious towards nature. Social media has become the platform where people are educated about the issues.

Citizens are now looking for healthier alternatives, people are showing intent to purchase organic foods over the unhealthy alternatives.

There are several incidents in the past decade, where there were issues relating to corporate governance. So, ESG implementation is the need of the hour in India.

ESG in Financial Matters

Investors are applying non-financial metrics to determine a company with ESG. So many Asset Managers have come up with a strategy to include ESG.

Several large-cap companies have started adopting the strategy. Below are few companies along with their 10-year return.

Source: Economic Times.

Also, several retail investors have started to invest in the ESG based Mutual Funds. The link below would redirect to few funds with ESG implemented.

Conclusion

Although ESG might not be beneficial in the short term it will turn fruitful for the investors in the coming future. A good way to analyze this is by checking the ESG scorecard. 


The above views are my personal views and they should not be considered as an Investment option.