Assessment of 586 cos shows 14 in ‘leadership’ category, 73 ‘below average’ and ‘weak’
Said Amish Mehta, Managing Director and CEO, CRISIL, “ The uptake of sustainability in decision making is very piecemeal in India Inc because of a lack of stewardship, and fiduciary persuasion to improve the ESG quotient”
Mumbai:
Rating agency CRISIL’s environmental, social, and governance (ESG) risk assessment of 586 Indian companies across 53 sectors, based on fiscal 2021 data, indicates an improvement in the ESG scores of a majority of them compared with the previous year, driven by better disclosures and improved performance on various parameters.
This is visible especially in renewable energy consumption, gender diversity and Board independence.
On comparing the same set of 225 companies analysed last year, 14 showed a significant positive deviation (more than 5-point increase in score) and three a notable negative deviation (more than 5-point decline in score). As many as 199 were relatively stable.
Overall, the latest assessment placed only 14 companies in the ‘leadership’ category, 108 in the ‘strong’ category, and as many as 73 in the ‘below average’ and ‘weak’ categories.
Said Amish Mehta, Managing Director and CEO, CRISIL Ltd, “Leaders on ESG have demonstrated a clear commitment towards sustainability, and have consistently delivered superior performance. In contrast, those in the ‘weak’ and ‘below-average’ categories have poor disclosures and inadequate ESG risk-management practices. The uptake of sustainability in decision making is very piecemeal in India Inc because of a lack of stewardship, and fiduciary persuasion to improve the ESG quotient.”
For ESG to truly be embedded and practiced in spirit, all stakeholders have to work collaboratively and create a favourable environment for ESG in India, said Mehta.
In addition to focussing in the near-term on targeted actions such as decarbonisation, a mindset shift is necessary to transform from merely complying to creating value and structurally mitigating risk, he added.
Said Suresh Krishnamurthy, Senior Director, CRISIL Research, “Governance remains the cornerstone of not just ESG, but overall corporate performance. This is amply clear from the fact that the absolute operating profit of the top 10 companies on the ‘G’ parameter saw a 23% compound annual growth rate (CAGR) between fiscals 2019 and 2021, whereas that of the bottom 10 logged a negative 7% CAGR. ”
The top 10 ‘G’ scorers also outperformed their respective industry operating profit growth by a solid 900 basis points (bps). As many as 6 out of 10 companies outdid their respective industries. Conversely, the bottom 10 ‘G’ scorers underperformed by a negative 1,200 bps, with 7 out of 10 companies underperforming their respective industries, he explained.