Dr. Somarata Guha Chakraborty, Associate Professor, IQ City United World School of Business, Kolkata
This COVID 19 Pandemic has brought about unprecedented changes to business and life at a large. The biggest lesson learned in this era is to build up resilience amid this turbulent and transforming phase. Traditionally business performance are linked with the financial and economic metrics only but after this two years of pandemic phases there has been a demographic shift of investor’s profile emphasizing on developing the long term business resilience. Traditional investing has focused on financial metrics only, but sustainable investments combines the best in class practices of traditional investing with insights about society to produce better outcomes for investors in the long term. Sustainable investing comes in three common forms- i) Socially Responsible Investing(SRI)- screening out some companies from investment consideration based on specific ethical guidelines e.g. screening out companies engaged in tobacco, alcohol, firearms, environmental damage etc, ii) Impact investments- focused on specific sectors like healthcare, education, agriculture renewable energy etc with the aim of generate specific social or environmental outcome in addition of financial return, iii) ESG – the most popular form of the sustainable investments. ESG is the acronym for Environmental, Social and corporate Governance. It integrates these three factors into investment decisions as a means to contribute towards the sustainable development of the community, to make companies grow sustainably with positive impact on internal and external stakeholders. Strong ESG integration leads to effective utilization of resource leading to cost saving, superior revenue by tapping new market or expanding the market share in existing market, better access to resources, less regulatory intervention and overall increases productivity with superior returns.
An important initiative in this direction was launched at WEF’s fourth annual Sustainable Development Impact Summit in September 2020, where a set of universal ESG metrics and disclosures were released to measure stakeholder capitalism that companies can report on regardless of their industry or region.
India has introduced new environment, social, and governance (ESG) reporting requirements for the top 1,000 listed companies in the country by market capitalization. The Securities and Exchange Board of India (SEBI) stipulates that the disclosure must be made through a new format, namely the Business Responsibility and Sustainability Report (BRSR) which will replace Business Responsibility Reporting (BRR). BRSR reporting has been made voluntary for FY 2021-22 but will be mandatory from FY 2022-23. This is to provide companies with sufficient time to adapt to the new reporting compliance. Although many big corporate houses like TATA group of Companies, Vedanta, Welspun, Infosys, Wipro have already embarked on a journey to integrate ESG but the framework and guidelines created by the regulatory Authorities should be adaptive and flexible so that many more companies can implement them in a manner that is relevant to their business and sectors.
