Page 58 - Banking Finance September 2024

ARTICLE

of 3.5% per year from 2010 to 2022. This strong companies often lack the resources for comprehensive
performance is expected to continue attracting more ESG reporting.
investors to ESG funds in India. Cultural and Regulatory Differences: India’s
evolving regulatory environment may lead to
Technological Advancements and Data Availability The
discrepancies with global ESG standards.
availability of ESG data and technological advancements,
Investor Education: Retail investors, particularly
particularly in AI, continues to improve the precision of
outside major cities, still lack awareness of ESG
ESG assessments. More Indian companies are adopting
investing. Greater education is needed to bridge this
digital tools for ESG reporting, and fintech firms are
gap.
developing platforms to make ESG investing more
accessible.
Future Growth Prospects
Global Investors' Interest in Indian ESG Assets The future of ESG investing in India is bright. As more
Indian companies adopt sustainable practices and the
As global investors look to diversify their portfolios, India
country continues to position itself as a leader in clean
has emerged as a prime destination for ESG investments.
energy and other ESG-related sectors, the scope for growth
India's large, young population, combined with a proactive
is immense. Indian AMCs are expected to launch more
regulatory environment, makes it an attractive option. In
ESG-themed products, including green bonds and ESG-
2023, India saw a record inflow of over $3 billion in
linked ETFs. The combination of a supportive regulatory
foreign direct investment (FDI) targeted at ESG-compliant
environment and an environmentally conscious population
sectors such as renewable energy, electric vehicles, and
will create fertile ground for ESG investment growth.
sustainable infrastructure.
Conclusion
India’s Sustainable Development Commitments India
remains committed to international sustainability ESG investing is rapidly becoming a mainstream investment
agreements like the Paris Agreement. As of 2024, India strategy worldwide, and India is set to play a pivotal role
is on track to reduce its carbon emissions intensity by 40% in this transformation. As more Indian companies adopt
from 2005 levels and is on course to meet its target of sustainable practices, the market for ESG-themed mutual
50% of power capacity from non-fossil fuel sources by funds will continue to grow. Investors embracing ESG
2030. investing can expect not only financial returns but also the
satisfaction of contributing to a more sustainable and
Corporate Social Responsibility (CSR) Mandates India equitable world. With strong regulatory support, India’s
continues to mandate Corporate Social Responsibility financial markets are well-positioned to become key
(CSR) spending. Under the Companies Act 2013, players in the global shift towards responsible investing.
companies meeting specific criteria must spend at least 2%
of their average net profits on CSR activities, encouraging
the integration of social and environmental concerns into
corporate strategy. First ESG Fund in India
The first ESG (Environmental, Social, and Gov-
Challenges and Roadblocks ernance) fund in India was launched by SBI
Despite promising developments, challenges remain in
Mutual Fund in 2020, focusing on companies
India’s ESG landscape:
that score high on sustainability metrics. ESG
Lack of Standardization: ESG metrics still lack
funds are gaining traction as investors become
standardization, making it difficult for investors to
more socially conscious.
compare companies.
Limited Data Availability: Small and mid-cap

52 | 2024 | SEPTEMBER | BANKING FINANCE