India Inc’s ESG scores improving gradually: Crisil
India Inc’s environmental, social and governance (ESG) scores are gradually improving, driven by better disclosures and improved performance on various parameters, according to a Crisil report.
This is visible especially in renewable energy consumption, gender diversity and board independence, the study based on fiscal 2021 data, said.
The assessment of 586 companies across 53 sectors, shows 14 in ‘leadership’, 108 in the ‘strong’, 73 ‘below average’ and ‘weak’ categories. This indicates an improvement in the ESG scores of a majority of them compared with the previous year. On comparing the same set of 225 companies analysed in FY20, 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), it said.
“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,” Amish Mehta, Managing Director and Chief Executive Officer, Crisil said.
In general, the performance of companies on the environmental parameter was weaker compared with social and governance.
On social aspects, public sector undertakings fared relatively better with an average score of 55 compared with 49 for private companies. They were better on key parameters such as gender diversity (15.3% for PSUs versus 12.7% for private companies), attrition (2% for PSUs and 22% for private), and pay disparity (CEO to median employee pay ratio of 4.8x for PSUs versus 137x for private).
In governance practices, however, PSUs lagged private companies, especially in board composition and functioning, it added.