Indian cos’ ESG reporting improves markedly after Sebi surge

The energy and utilities sector reports nearly 50% of companies’ ESG metrics, while service sector entities have historically performed well in reporting data

Indian companies’ environmental, social, and governance (ESG) reporting has improved significantly since 2020, CareEdge Research said on Thursday.

The improvement is the result of a push by the market regulator Securities and Exchange Board of India for ESG disclosures, with many companies increasing their ESG numbers from a paltry 127 in fiscal 2020 to 330 in the 2022 financial year.

The study analyzed reports from the top 1,000 listed entities over the past three years. See significant improvements in ESG disclosure by companies based on their integrated reports, sustainability reports, and corporate responsibility and sustainability reports (BRSR). This has also led to an upward revision of the ESG scores of these companies.

The Sebi circular requires target companies to disclose sustainability data beginning in FY23. 18% of target companies voluntarily disclosed BRSR figures for FY22.

“The energy and utilities sector saw close to 50% of companies reporting on ESG parameters. While service sector entities have traditionally been robust in disclosing ESG data, the rising awareness among financial institutions in adopting ESG practices in their operations has further led to 41% of the companies in the last 3 fiscals reporting ESG data,” it said.

While the overall rating of the top 1,000 listed companies remains in the “medium” rating category, companies that have disclosed ESG data have improved their ratings by nearly 15% over the past three years.

Companies have reported an average improvement of 20% in ESG performance in the materials sector over the past three years. It highlights how emissions-intensive industries such as steel, cement, and mining are gradually adopting green initiatives to achieve their long-term ESG goals.

“The utilities & energy sector, too, has witnessed notable improvement, signaling the transition of the sector towards long-term ESG commitments along with a visible shift towards green energy resources,” CareEdge Research said.

This is also in line with the government’s commitment to pushing India itself to net zero emissions by 2070.

“As reflected in CareEdge’s latest study, there has been a substantial jump of 160% in ESG reporting from FY20 to FY22 by Indian corporates, which is quite encouraging. Not only does this align with the Indian government’s focus on Green Growth emphasized in the latest Union Budget, but it also aids the country’s commitment towards achieving Net Zero by 2070,” Mehul Pandya, MD & CEO, CareEdge said.

“With market regulator SEBI’s circular on Business Responsibility and Sustainability Reports making ESG disclosures mandatory from FY23 for the top 1,000 listed entities, I believe there will be a further boost for Indian corporates to transition towards sustainable practices,” he added.