Environment Social Governance (ESG) and Sustainability Advisory
Strong corporate performance in Environmental, Social & Governance (ESG) mean high sustainability rankings which in turn support high market capitalization and valuations. Therefore, investors watch ESG KPIs more closely than GRI KPIs, as ESG focusses more on shareholder’s concerns. ESG-driven funding is growing exponentially forcing companies to do well on ESG aspects in order to reflect strong values of culture, behaviour, branding, intellectual capital, and leadership.
The fund managers embed ESG in their investment strategy and conduct periodic adjustments based on ESG scores which sets the tone for large institutional investors to commit their funds. The capital markets have coalesced around ESG-investing and companies are innovating their businesses, minimizing wastage, and have assimilated new opportunities that have come out of ESG framework.
However, as shown in the figure, there are gaps particularly in reporting, rating, auditing, consistency and overall alignment with UN Sustainable Development Goals (SDGs), GRI Sustainability Reporting and Indian Statutory Disclosure Requirements.
Whilst the ESG ecosystem is collectively working to fix these issues, EcoBlu has summarized key observations in the following paper along with solutions for the Indian market:
Our ‘Screen Model’ works off the common database of statutory disclosures to develop both GRI Sustainability and ESG reports, thus minimizing the onus of reporting. Then we apply the ‘Pivot Model’ to harness key areas of ESG/Sustainability to diversify the company’s activities in specific social sectors/markets pursuant to contracting and concession models with the central/state government. Therefore, our ‘Screen & Pivot’ models described in Paper #1 enable low-cost ESG reporting and monetize ESG opportunities based on ‘do-no-harm’ principle in a desi-jugaad manner.
Furthermore, to enable C-Suite interact consistently on non-financial reporting, we have streamlined the methodology of comparing ‘ESG versus GRI’ KPIs in Paper #2 so that Investor Relations can efficiently engage with external stakeholders. Using the ‘Screen & Pivot’ model for GRI and ESG, we develop the case for diversification efforts and enable interesting storylines on sustainability.