Mumbai: India Ratings & Research (Ind-Ra), the local arm of the global major Fitch, on Thursday said it would include detailed ESG (environment, social and governance) commentaries in all the rating rationales for every listed entity. The decision comes at a time when markets regulator Sebi has been actively pursuing listed companies to have strict ESG disclosure standards.
Ind-Ra will look into 14 different factors under its ESG framework, it said, which include a company’s greenhouse gas emissions, energy & water management processes, community & labour relations, ownership & board structure, and time of financial disclosures.
Under this framework, Ind-Ra would “transparently and consistently communicate both the relevance and materiality of ESG elements to the rating decision”, it said in a release. “The E, S and G relevance can be both positive and negative and will be sector based and entity specific. The disclosures are drawn from Sustainability Accounting Standards Board’s (SASB’s) Global Sustainability Framework with a total of 14 factors (five for environmental, five for social and four for governance). These factors are fundamental factors in the ESG journey of any entity and would help Ind-Ra to make the disclosures specific wherever these have a relevance to the rating.”
In the last few years, Sebi chairman Ajay Tyagi has time and again reminded the business community that ESG compliance for all of its regulated entities is one of its top priorities. On December 3, in his speech at the inauguration of the Arun Duggal ESG Centre for Research and Innovation, IIM-Ahmedabad, Tyagi had said that ESG as a concept was not new. However, a series of climate-driven disasters in recent times, like unexpected floods, wildfires, and economic & social disruptions “emanating from the Covid pandemic appear to have driven home the importance of ESG as a critical component for long-term business resilience, making ESG the buzzword in the investment ecosystem”.
As investors have become more conscious about ESG-related issues and the pressure on corporates to focus on ESG has increased, “this has led to increased investor interest and demand for ESG reporting, ESG ratings and ESG-related products”, the Sebi chief had said.
