Reference Material Module 1

ESG Research Foundation
Pandit Madan Mohan Malaviya National (Knowledge Partner)

Mission on Teachers and Teaching
Ministry of Education
Goverment of India
CERTIFICATE COURSE
on
FUNDAMENTALS OF ESG & SUSTAINABILITY
reference Material
MODULE 1
Table of Contents
Introduction –
Global Challenges like Climate Change, Biodiversity Loss, Rising Inequality, and
Resource Depletion
What is Sustainability
Global Sustainability Initiatives
What are Sustainable Approaches
What are SDGs and how are they linked ESG
What is ESG and Why ESG is required
ESG Research Foundation | Reference Material | Module 1 Page 1 of 51

Before we discuss what is sustainability let us first find out the factors that have created the
need to adopt Sustainability. Since 1850s our world has seen an enormous growth in
industrialisation. Combustion of fossil fuel in industries, vehicles and electricity generation has
led to the gigantic rise in emissions of Greenhouse gases (GHGs). The GHGs, however useful
in keeping the Earth warm, have now exceeded the limits and cause Global Warming and
Climate change as they trap sunlight.
Apart from Climate Change, there are various other challenges that the world is facing
currently like Biodiversity loss, Depletion of resources, Rising inequality etc.
Let us look at these challenges in detail.
1. Global challenges
World Economic Forum (WEF), releases an annual Global Risk Report in which top global risks
are mentioned. In the 2023 Report, failure to mitigate climate change, failure of climate
change adaptation, natural disasters and extreme weathers events, biodiversity loss and
ecosystem collapse were listed as the major challenges in the near future (10 years).
The report can be accessed with link provided below.
Global Risks Report 2023- 98 pages 1 0F
Climate Change is listed as one of the major threats to humanity.
1.1. What is Global Warming and Climate Change
Rise in global temperature of the earth due to increased concentrations of greenhouse gases
like carbon dioxide, methane is called global warming. These gases act as blanket and trap
sunlight, increasing the Earth surface’s average temperature. Climate change basically refers
to alterations in the long - term weather and temperature patterns.
1.1.1. Causes of Climate Change
1
https://www.weforum.org/reports/global-risks-report-
2023/?DAG=3&gclid=Cj0KCQjwk7ugBhDIARIsAGuvgPbWblm9vfQ3Nim50YXQ2H5Yo7rQL2o64uje2ewOL96xsStimu6i-
asaAoZQEALw_wcB

According to various UN sources 2 1F
• Fossil fuels
• Generating power
• Manufacturing goods
• Cutting down forests
• Transportation
• Producing food
• Powering buildings
• Overconsumption
1.1.3 Impacts of Climate Change 2F

3
• Hotter temperatures
• More severe storms
• Increased drought
• Loss of species
• Not enough food
• More health risks
• Poverty and displacement
• A warming, rising ocean
Latest IPCC AR6 Report-Summary for Policy Makers- 36 pages 4 3F
Climate Change 2021 – The physical Science basis (Full Report): 2409 pages 5 4F
Climate change 2022- Impacts, adaptation and vulnerability 6 5F
2
https://www.un.org/en/climatechange/science/causes-effects-climate-change
3
4
https://report.ipcc.ch/ar6syr/pdf/IPCC_AR6_SYR_SPM.pdf
5
https://report.ipcc.ch/ar6/wg1/IPCC_AR6_WGI_FullReport.pdf
6
https://www.ipcc.ch/report/ar6/wg2/

Climate change 2022- Mitigation of Climate Change
Summary for policy makers- 100 pages 7 6F
Technical Summary- 102 pages 8 7F
Full Report- 2258 pages 9 8F
The second challenge is:
1.2 Biodiversity Loss
Biological diversity means the variability among living organisms from all sources including,
inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of
which they are part; this includes diversity within species, between species and of ecosystems.
-CBD (Convention on Biological Diversity) 10 9F
Biodiversity loss- The reduction of any aspect of biological diversity (i.e., diversity at the genetic,
species and ecosystem levels) is lost in a particular area through death (including extinction),
destruction or manual removal; it can refer to many scales, from global extinctions to population
extinctions, resulting in decreased total diversity at the same scale. 11 10F
Drivers of Biodiversity loss
As per Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services

IPBES, there are direct and indirect drivers which leads to biodiversity loss.
Direct Drivers for Biodiversity Loss:
7
https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_SummaryForPolicymakers.pdf
8
https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_TechnicalSummary.pdf
9
https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_FullReport.pdf
10
https://www.cbd.int/convention/articles/?a=cbd-02
11
https://ipbes.net/glossary/biodiversity-
loss#:~:text=The%20reduction%20of%20any%20aspect,extinctions%2C%20resulting%20in%20decreased%20total

• Land /sea use changes
• Pollution
• Direct Exploitation
• Climate Change
• Invasive Alien Species
Indirect Drivers for Biodiversity Loss:
• Demographic and sociocultural

• Economic and Technological
• Institutions and Governance
• Conflicts and epidemics
IPBES Report- 45 Pages 12

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The planet is unable to support current models of production and consumption. A growing
global population is expected to demand 35% more food by 2030. The interconnectivity
between trends in climate change and resource scarcity is amplifying the impact: climate
change could reduce agricultural productivity by up to a third across large parts of Africa over
the next 60 years. Globally, demand for water will increase by 40% and for energy by 50%.
(PWC)
As per The State of Food Security and Nutrition in the World 2023 report, updated
projections show that almost 600 million people will be chronically undernourished in 2030
due to a variety of factors such as rapid urbanisation, climate change etc.
In short, the world’s current economic model is pushing beyond the limits of the planet’s ability
to cope, which brings us to next challenge which is Depletion of Resources.
1.3 Depletion of Resources
1.3.1 Resource depletion occurs when the natural resources are consumed much faster
than they are replenished.
12
https://ipbes.net/sites/default/files/ipbes_7_10_add.1_en_1.pdf

1.3.2 Major Causes of Depletion of Resources:
• Overpopulation
• Overconsumption
• Deforestation
• Mining and extraction of metal and minerals
• Erosion
 According to Global Resource Outlook Report 2019 13, the use of natural resources
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has more than tripled from 1970 and is continuously increasing.

 This has resulted in negative impacts on environment and human health.
 The resource consumption, distribution and its benefits vary across different
regions and countries.
 If the pattern of rapid growth, inefficient consumption continues like this then it
will create unsustainable pressure on the environment.
1.3.3 Consequences
Due to resource depletion, there is:
• Poverty
• Food shortage /hunger
• Inflation
• Water stress
• Loss of biodiversity
An indicator to show how fast humans are consuming natural resources is Earth
overshoot day.
13
https://www.resourcepanel.org/reports/global-resources-outlook

1.3.4 Earth overshoot day 14 is the day where human have utilised all their biological
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resources that the earth regenerates during the entire year has shifted from
December to August. It basically means we are consuming more resources
than the earth can regenerate and as per latest estimates, we need 1.75 earths
to meet our current needs.
Additionally country overshoot day tells us how different countries’ rates of consumption can lead
to earth overshoot day pretty early in the year.
https://www.overshootday.org/newsroom/country-overshoot-days/
The above figure country denotes country wise consumption rates and if everyone in the world
were to use resources at that rate, then earth overshoot day would fall much earlier, for example
as per Qatar and Luxembourg, it would fall as early as in February only.
The next challenge is the Rising Inequality.
14
https://www.overshootday.org/newsroom/past-earth-overshoot-days/

1.4 Rising Inequality
Three types of inequality are discussed here:
• Economic inequality
• Gender inequality
• Carbon inequality
First is the economic inequality which is the most prevalent amongst the three.
1.4.1 Economic Inequality
Economic inequality is defined as unequal distribution of income and opportunity. Income

inequality refers to the extent to which income is evenly distributed within a
population (IMF).
As per World Inequality Report 2022 15, Average income in Sub-Saharan Africa is 0.3,
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i.e., 31% of the global average, and in South and Southeast Asia it is 0.5, i.e., 50% of
the global average. Latin America, East Asia, and Russia and Central Asia have average
incomes at or near the global average. In Europe, the ratio is more than twice the
global average (215%), and in North America it is three times the global average.
This means that North Americans earn 6 to 10 times more, on average, than Sub-
Saharan Africans, South and Southeast Asians, while East Asians earn half of what
Europeans earn. Note that these incomes are all expressed in purchasing power parity
and not market exchange rates.
As per Global Wealth Report 2022 16, On a country-by-country basis, the United
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States added the most household wealth in 2021, followed by China, Canada, India and
Australia. Wealth losses were less common and almost always associated with
currency depreciation against the US dollar, affecting for example Japan, Italy and
Turkey. While Switzerland still ranks highest in terms of wealth per adult at USD
696,600, followed by the United States, Hong Kong SAR and Australia, the more
relevant median wealth per adult criterion places Australia, Belgium and New Zealand
15
https://wir2022.wid.world/
16
https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html

in the top three positions with USD 273,900, USD 267,890 and USD 231,260,
respectively.
In a nutshell, Wealth differences are very pronounced. The trend this century is
encouraging as wealth differences between countries have tended to narrow reducing
worldwide wealth. The global median wealth has risen twice as fast as global wealth
per adult since 2000. However, at the country or regional level the outcomes may
differ.
1.4.2 Inequality at the Gender Level
Gender Inequality refers to “Disproportionate difference between men and women and
boys and girls, particularly as reflected in attainment of development goals, access to
resources and levels of participation.” (UNICEF)
The Global Gender Gap Index benchmarks the current state and evolution of gender
parity across four key dimensions (Economic Participation and Opportunity,
Educational Attainment, Health and Survival, and Political Empowerment). It is the
longest-standing index which tracks progress towards closing these gaps over time
since its inception in 2006.
The Global Gender Gap Index measures scores on a 0 to 100 scale and scores can be
interpreted as the distance covered towards parity (i.e., the percentage of the gender
gap that has been closed)
As per The Global Gender Gap Report in 2022 17, the global gender gap has been closed
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by 68.1%. At the current rate of progress, it will take 132 years to reach full parity.
The top 10 economies have closed at least 80% of their gender gaps, with Iceland
(90.8%) leading the global ranking.
17
https://www3.weforum.org/docs/WEF_GGGR_2022.pdf

Iceland is the only economy to have closed more than 90% of its gender gap. Other
Scandinavian countries such as Finland (86%, 2nd), Norway (84.5%, 3rd) and Sweden
(82.2%, 5th) feature in the top 5.
For other subindexes it will take 155 years to close the Political Empowerment gender
gap, 151 years for the Economic Participation and Opportunity gender gap, and 22
years for the Educational Attainment gender gap.
Another level where significant discrimination between men and women occurs is at
the employment opportunity.
The unemployment rate in women is higher as compared to men.
Similarly, women at leadership roles are very few as compared to men.
As per world gender Gap Report 2022, India ranked at 135th out of 145 countries.
Source-World gender gap report 2022
The Gender Inequality Index (GII) is a composite measure, reflecting inequality in

achievements between women and men in three dimensions: reproductive health,
empowerment and the labour market.
• The health dimension is measured by the maternal mortality ratio and the adolescent
fertility rate.
• The empowerment dimension is measured by the share of parliamentary seats held by

each gender, and by secondary and higher education attainment levels.
• The labour dimension is measured by women's participation in the workforce.
The GII varies between 0 (when women and men fare equally) and 1 (when men or
women fare poorly compared to the other in all dimensions). It is designed to reveal
the extent to which national human development achievements are eroded by gender
inequality, and to provide empirical foundations for policy analysis and advocacy
efforts.

The next inequality is at the level of carbon emissions, it is well known that some
countries emit much more carbon than others. Generally developed countries in the
north have significantly higher overall carbon emissions than the ones in the south.
1.4.2 Carbon Inequality
It refers to the difference in emissions of Carbon dioxide between developing and

developed countries due to consumption.
As per Our world in Data 18, estimates, following information can be interpreted:
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• the United States has emitted more CO2 than any other country to date: at around
400 billion tonnes since 1751, it is responsible for 25% of historical emissions; this is
twice more than China – the world’s second largest national contributor;
• the 28 countries of the European Union (EU-28) – which are grouped together here
contribute at 22%;
• many of the large annual emitters today – such as India and Brazil – are not large
contributors in a historical context;
• Africa’s regional contribution – relative to its population size – has been very small.
This is the result of very low per capita emissions – both historically and currently.
To calculate CO2 emissions per capita of a country, divide its total emissions by its
population.
The world’s largest per capita CO2 emitters are the major oil producing countries with
relatively low population size.
However, there are many countries which are major oil producers and have a relatively
small population meaning their total annual emissions are low.
More populous countries with some of the highest per capita emissions – and therefore
high total emissions – are the United States, Australia, and Canada. Australia has an
18
https://ourworldindata.org/contributed-most-global-co2

average per capita footprint of 17 tonnes, followed by the US at 16.2 tonnes, and
Canada at 15.6 tonnes.
This is more than 3 times higher than the global average, which in 2017 was 4.8 tonnes
per person.
In fact, some European countries have emissions not far from the global average: In
2017 emissions in Portugal are 5.3 tonnes; 5.5t in France; and 5.8t per person in the UK.
This is also much lower than some of their neighbours with similar standards of living,
such as Germany, the Netherlands, or Belgium. The choice of energy sources plays a key
role here: in the UK, Portugal and France, a much higher share of electricity is produced
from nuclear and renewable sources. 19 18F
Historically high emissions of north as compared to south has led to the view that the
former owes moral and ecological debt to the later.
Now that we know some of the some of the major challenges that the world is facing,
we will move on to the next topic which is Sustainability and what does sustainable
development means.
2 Sustainability
Sustainable development was first used in the “Our Common Future” report by Brundtland
commission, 1987. It was defined as:
“Meeting the needs of the present without compromising the ability of future”
One of the first major conference on sustainability that took place in 1992, was the
United Nations Conference on Environment and Development (UNCED), commonly
referred to as the Rio Conference or Earth Summit.
Agenda 21, the Rio Declaration on Environment and Development, and the Statement of
principles for the Sustainable Management of Forests were adopted by more than 178
19
https://ourworldindata.org/co2-emissions

Governments. The Commission on Sustainable Development (CSD) was created in
December 1992 to ensure effective follow-up of UNCED.
From here, basically more emphasis on sustainability was laid upon.
Some of the earlier texts from history that mentioned sustainability much before World
Commission’s Report and the need to reconsider development:
As per Environmental Essay: Sustainable development – historical roots of the concept

paper by JACOBUS A. DU PISANI, the term sustainability was reportedly mentioned in
the German forestry circles by Hans Carl von Carlowitz in Sylvicultura Oeconomica in
1713.
Essay on the principle of population focusing on the effects of growing population on the
future improvement of society, by Thomas Robert Malthus, was published in 1798.
Alfred Russell Wallace in his book “Our wonderful century”, published in 1898 included a
chapter on the plunder of the Earth, wherein reckless use of the resources by humans was
discussed. The themes were apparently, very similar to the ones in the Brundtland report.
“Limits to Growth” by the Club of Rome, 1972 talked about a ‘condition of ecological and
economic stability that is sustainable far into the future’ and capable of satisfying the basic
material needs of all people. 20 19F
It was basically the population boom and the industrialization when it was realized that our
resources be it coal, oil, wood etc. were finite and that we need to use them wisely to be able
to sustain them for future.
20
https://www.tandfonline.com/doi/pdf/10.1080/15693430600688831#:~:text=At%20the%20start%20of%20the,see%20Ward%20%26%2
0Dubos%201972).

3 Global Sustainability Initiatives
3.1 Sustainable Development Goals (SDGs) {2015-2030}
SDGs (Sustainable Development Goals) are a collection of 17 interlinked global goals designed
to be a “blueprint for peace and prosperity for people and the planet now and into the
future.” 21 20F
The 2030 Agenda for Sustainable Development was adopted by all 193 United Nations
Member States in 2015. These goals call for an urgent action by all the countries, in a global
partnership. They recognize that ending poverty and other deprivations must go hand-in-hand
with strategies that improve health and education, reduce inequality, and spur economic
growth – all while tackling climate change and working to preserve our oceans and forests.
21
https://sdgs.un.org/goals
https://www.local2030.org/library/251/From-MDGs-to-SDGs-What-are-the-Sustainable-Development-Goals.pdf
https://en.wikipedia.org/wiki/Sustainable_Development_Goals

It is made up of a political declaration, 17 goals, 169 targets, over 230 indicators for
measuring progress, and a framework for follow up and review. The 2030 Agenda came into
effect on January 1, 2016.
The goals were built on the Millennium Development Goals (MDGs), put forward in 2000 by
former UN Secretary General Kofi Annan and to complete what was not achieved. The MDGs
were the result of Agenda 21, a non-binding agreement that was reached at the 1992 Rio
Earth Summit.
They are integrated and indivisible and balance the three dimensions of sustainable
development: the economic, social and environmental.
3.1.1 Core elements of SDG: The SDG has three core elements of sustainable development:
 Economic Growth
 Social inclusion and
 Environmental protection
3.1.2 Principles:
1. Integration: The 2030 Agenda recognizes that all our systems are interlinked and
inherently interconnected.
2. University: Unlike the Millennium Development Goals that were targeted at
developing countries, the SDGs recognize that no country has successfully achieved
sustainability and therefore every nation has work to do.
3. Inclusive: The SDGs were developed by surveying over 5 million people around the
world and, while they were adopted by governments and therefore are ultimately the
responsibility of national governments, they rely on the involvement and participation
of all sectors of society
4. Leaving No one behind: The Agenda recognizes that the dignity of individual is
fundamental and that the Agenda’s Goals and targets should be met for all nations
and people and for all segments of society.

The goals aim to accelerate action in areas of critical importance to humanity and planet.
3.1.3 5Ps of Sustainability:
 People
 Planet
 Peace
 Partnership
 Prosperity
Implementation Progress: Every year, the UN Secretary General presents an annual SDG
Progress report, which is developed in cooperation with the UN System, and based on the
global indicator framework and data produced by national statistical systems and information
collected at the regional level.
Review Process: The SDGs are reviewed every year in New York in July at the High-Level
Political Forum (HLPF). At this event, progress on the overall agenda, individual goals and
individual countries (Voluntary National Reviews) is reviewed, gaps or challenges are
identified, and best practices and successful strategies are shared. Every 4 years, the goals
are reviewed at the General Assembly of the UN, which means the heads of state discuss their
progress on a 4-year cycle.
Latest Sustainable Development Goals Report 2023 can be accessed here.
https://unstats.un.org/sdgs/report/2023/
3.2 Conference Of Parties (COPs)
At the Rio convention (Earth summit), 1992, three conventions on Climate change, Biodiversity
and Desertification were established. These are UNFCCC (United Nations Framework
Convention on Climate Change), CBD (Convention on Biological Diversity), UN CCD (United
Nations Conventions to Combat Desertification).
The UNFCCC secretariat (UN Climate Change) is the United Nations entity tasked with
supporting the global response to the threat of climate change. It is the parent treaty of the

1997 Kyoto protocol and the 2015 Paris Agreement. It opened for signature in 1992 and
entered into force in 1994.
The COP (Conference of parties) is the supreme decision-making body of the Convention. All
States that are Parties to the Convention are represented at the COP, at which they review
the implementation of the Convention and any other legal instruments that the COP adopts
and take decisions necessary to implement them.
First COP meeting was held in Berlin, Germany in March 1995.The COP Presidency rotates
among the UN regions along with the venue of meeting.
Some of the major outcomes of COPs that have happened are:
COP 1, March- April 1995 – agreed on first joint measures in international climate action
COP 3, December 1997- achieved an historical milestone with adoption of the Kyoto
protocol, the world's first greenhouse gas emissions reduction treaty.
COP 7, November 2001 - Marrakech Accords: In Buenos Aires Plan of Action, Nations
ratified the Kyoto Protocol. It formalized agreement on operational rules for International
Emissions Trading, the Clean Development Mechanism and Joint Implementation along with
a compliance regime and accounting procedures.
Special climate change fund and the least developed country fund established.
COP 13, December 2007- Bali Road Map was adopted, including the Bali Action Plan, plotting
the course for a new negotiating process to address climate change. The Plan had five main
categories: shared vision, mitigation, adaptation, technology and financing.
COP 15, December 2009 - Copenhagen Accord that recognized the need to limit the global
temperature rise to 2°C. Developed countries pledge up to USD 30 billion in fast-start finance
for the period 2010-2012.
COP 16, November-December 2010- "Green Climate Fund", " Technology mechanism" and
the Cancun adaptation framework was established.

COP 18, November- December 2012-The Doha Climate Gateway. Doha amendment
adopted launching a second commitment period of the Kyoto protocol 22 21F
COP 21 Paris Agreement, 2015
The Paris Agreement is a legally binding international treaty on climate change. It was
adopted by 196 Parties at COP 21 in Paris, on 12 December 2015 and entered into force on
4 November 2016.
Its goal is to limit global warming to well below 2℃, preferably to 1.5 degrees Celsius,
compared to pre-industrial levels.
For the countries to achieve this long-term temperature goal, peaking of greenhouse gas
emissions has to take place as soon as possible.
• The Paris Agreement is a landmark in the multilateral climate change process as it is

a binding agreement and brings all nations into a common cause to
undertake ambitious efforts in order to combat climate change.
• Its Implementation requires economic and social transformation. The Paris Agreement
works on a 5- year cycle.
NDCs (Nationally Determined Contributions) are used to communicate actions, each country
is taking or will take to reduce their Greenhouse Gas emissions, to achieve the goals of the
Paris Agreement.
The Agreement has also asked countries to formulate and submit long-term low greenhouse
gas emission development strategies (LT-LEDS). However, Unlike NDCs, they are not
mandatory.
To measure progress, countries established an enhanced transparency framework (ETF).
22
https://unfccc.int/process/bodies/supreme-bodies/conference-of-the-parties-cop
https://unfccc.int/timeline/

COP 26, Glasgow ,31 October -13 November 2021
Glasgow Climate Pact was adopted.
At COP 26, the urgency to reduce emissions was recognised and hence the Paris agreement goal
was reaffirmed.
Two key issues regarding the phase down of coal agreed by 190 countries and inefficient fossil fuel
subsidies were agreed upon finally.
The pledge to deliver US$100 billion a year for developing countries was pushed further as
developed countries promised, it will be met by 2023.
The Glasgow Pact called for a doubling of finance to support developing countries in adapting to
the impacts of climate change and building resilience, the funding is not sufficient to meet all the
needs. Glasgow also established a work programme to define a global goal on adaptation, which
will identify collective needs and solutions to the climate crisis already affecting many countries
Apart from the Glasgow climate pact, some other deals were announced too.
A landmark step to halt and reverse Forests loss and land degradation by 2030 was taken,
137 countries committed. Moreover, CEOs from more than 30 financial institutions with over
$8.7 trillion of global assets committed to eliminate investment in activities linked to
deforestation.
A Global Methane Pledge to reduce emissions by 30 % compared to 2020, by the end of 2030,
was signed by 103 countries, including 15 major emitters. After carbon dioxide methane is one of
the potent greenhouse gases Methane, one of the most potent greenhouse gases, is responsible
for a third of current warming from human activities.

Source – COP 26 The Glasgow Climate Pact -28 pages 23
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COP 27, Egypt, November 2022
Agreement on Loss and Damage fund was a major milestone of this conference in Sharm el-
Sheikh. The developing countries had been asking for financial assistance to rescue and rebuild
the physical and social infrastructure devastated by the extreme weather events, it was finally
agreed upon. A new transitional committee will be set up to arrange the funding.
The goal to keep temperature rise to 1.5 ℃ was agreed upon last year as well and this was
reaffirmed at this COP too.
Adaptation- progress was made on The Global Goal on Adaptation. New pledges, totaling
more than USD 230 million, were made to the Adaptation Fund.
23
https://ukcop26.wpenginepowered.com/wp-content/uploads/2021/11/COP26-Presidency-Outcomes-The-Climate-Pact.pdf

Sharm el-Sheikh Implementation Plan highlighted that the funds of USD 4-6 trillion a year
are required for the global transformation, and it would require transformation of the financial
system.
A new five-year work program to promote climate technology solutions in developing

countries was launched.
Conclusion of the first global stocktake process has taken place before COP 28, which is set
to happen in UAE.
Reference to tipping point was also made from IPCC assessment report. It basically means
that warming does not happen in linear fashion, rather in an escalating and unpredictable
manner. 24
23F
3.3 Convention on Biological Diversity (CBD)
As mentioned earlier CBD was created at the Rio convention, 1992.
The three aims of the convention are – conservation of biodiversity, sustainable use and
sharing of the benefits of genetic resources.
Biodiversity COPs are held every two years, except last one, which got delayed by the Covid -
19 Pandemic. 25 24F
Important outcomes till now include:
3.3.1 The Cartagena Protocol
The Cartagena Protocol, entered into force 11 September 2003, seeks to protect
biodiversity from the potential risks posed by living modified organisms resulting from
modern biotechnology, it has been ratified by 173 Parties.
24
https://unfccc.int/news/cop27-reaches-breakthrough-agreement-on-new-loss-and-damage-fund-for-vulnerable-countries
25
https://www.cbd.int/cop/

3.3.2 The Nagoya Protocol
The Nagoya Protocol on ABS (Access to Genetic Resources and the Fair and Equitable Sharing
of Benefits Arising from their Utilization) was adopted on 29 October 2010 in Nagoya, Japan
and entered into force on 12 October 2014
It is a supplementary agreement to the Convention on Biological Diversity. It provides a

transparent legal framework for the effective implementation of one of the three objectives
of the CBD i.e. the fair and equitable sharing of benefits arising from the utilization of genetic
resources.
The Nagoya Protocol applies to genetic resources that are covered by the CBD, to the benefits
arising from their utilization and traditional knowledge (TK) associated with genetic resources
3.3.3 Aichi Targets
These targets were adopted at 2010 CBD summit in Nagoya. Some progress was made, however
most of the targets were not met or achieved globally due to lack of clearly defined metrics.
There were 20 targets involving spreading awareness, conservation of land and sustainable
agriculture, aquaculture and protected areas etc.
For detailed targets list, refer to the link. 26

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3.3.4 Biodiversity COP 15 Montreal, 2022
COP 15 took place in December 2022 in Montreal. It was presided by China. The theme for this
year was Ecological civilization.
26
https://www.cbd.int/sp/targets/
https://bch.cbd.int/protocol/background/

Montreal- Kunming Global Biodiversity framework was adopted.
The Global Biodiversity framework has 4 goals and 24 targets such as:
• To Protect 30% of Earth’s lands, oceans, coastal areas, inland waters,

• Cut food waste in half by 2030.
• Reduction in invasive species,
• To reduce the current rate of extinctions by 90%, enhance the integrity of all ecosystems,
• Digital sequence information.
• There are no country specific targets, and it is not legally binding.
The goals are:
Source-CBD 27 26F
27
https://www.cbd.int/article/cop15-cbd-press-release-final-19dec2022

3.4 Biodiversity’s Impact on Businesses
Biodiversity is an important resource and is highly valuable as it regulates nature’s critical processes
such as supports ecosystem functions like pollination, pest control, provides oxygen, clean air and
water etc.
Biodiversity is not only crucial for human survival but also for businesses.
As per World Economic Forum report titled- “Nature Risk Rising: Why the Crisis Engulfing
Nature Matters for Business and the Economy” 28, there are three ways in which the
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destruction of biodiversity and ecosystems creates risks for businesses:
1. Dependency of business on nature: when businesses depend directly on nature for

operations, supply chain performance, real estate asset values, physical security and business
continuity
2. Fallout of business impacts on nature: when the direct and indirect impacts of business
activities on nature loss trigger negative consequences, such as losing customers or entire
markets, costly legal action and adverse regulatory changes
3. Impacts of nature loss on society: when nature loss aggravates the disruption of the
society in which businesses operate, which in turn can create physical and market risks
28
https://www3.weforum.org/docs/WEF_New_Nature_Economy_Report_2020.pdf

The above image depicts how much destruction of land and oceans have already taken place
as a result of human activities. And therefore, it becomes more necessary to protect the
devastation of remaining ecosystems. The global economy is dependent on earth’s broader
ecosystems.
3.4.1 Industry dependence on Nature
The three largest sectors construction ($4 trillion), agriculture ($2.5 trillion) and food and
beverages ($1.4 trillion), that are highly dependent on nature generate together close to $8
trillion of gross value added (GVA). This is roughly twice the size of the German economy.
Industries which depend on the direct extraction of resources from forests and oceans or the
provision of ecosystem services such as healthy soils, clean water, pollination and a stable
climate could suffer losses, if nature loses its capacity to provide such services.
3.4.2 Risks from nature loss on society:
• Risks to global health –
Degradation and loss of nature can cause outbreak of diseases like Zika and Ebola.

Destruction of forests and vegetation also exacerbate effects of air pollution, which is a major
threat to the health of public.
• Risks to global peace
Degradation of nature along with climate change can aggravate water scarcity problems
leading to conflicts and disputes. Similarly, droughts events have been linked to violence.
• Risks to global trade
Fires in Amazon forests in Brazil have led to a disagreement in a trade deal.
• Risks to economic development
Loss of natural systems not only creates loss of economy but also has profound effect on rural
communities’ livelihoods. Thus, affecting global poverty and development.
• Risk to gender equality
Women are affected more as they are involved in managing natural resources like collecting
fodder, wood and water, if this section of society is unable to contribute towards economic
activity, it can have effect businesses by reducing marketing opportunities.

4.Approaches to Sustainability
There are different approaches to sustainability which can be employed to reduce its
environmental impact.
4.1Triple Bottom Line (TBL)
TBL is a sustainability-related construct that was coined by Elkington (1994) 29

28F . He used the
terms profit, people, and the planet as the three lines.
TBL focuses not just on the corporations’ economic value but also on the environmental and
social value.
This concept is better than traditional sustainability because of the following reason:
Better construct and all three lines are equally emphasized which brings more balance and
coherence into the construct.
• Economic line- refers to the impact of the organization’s business practices on the
economic system. It pertains to the capability of the economy as one of the subsystems
of sustainability to survive and evolve into the future in order to support future
generations (Spangenberg, 2005). The economic line ties the growth of the
organization to the growth of the economy and how well it contributes to support it.
• Social line- refers to conducting beneficial and fair business practices to the labour,
human capital, and to the community. The idea is that these practices provide value to
the society and “give back” to the community.
• The environmental line - refers to engaging in practices that do not compromise the
environmental resources for future generations. It pertains to the efficient use of
energy recourses, reducing greenhouse gas emissions, and minimizing the ecological
footprint.
29
Enter the Triple Bottom Line chapter (John Elkington)- 15 pages
https://www.johnelkington.com/archive/TBL-elkington-chapter.pdf

John Elkington predicted that in global cultural revolution, businesses would need to
transform to a greater extent. Further, he said for sustainable global economy to emerge, key
driver will be the unsustainability of current patterns of wealth creation and distribution. Ever
since the past, economy has been highly destructive of natural and social capital and is
characterized by large and growing gaps between rich and poor.
30
29F 4.2 Circular Economy
The current consumption pattern of using/ extracting resources and throwing away them as
waste has resulted not only in depletion of valuable resources but also generation of huge
amount of waste. This is a linear system, often termed as the take, make and waste system.
As per Macarthur foundation - circular economy is defined as an economic activity which

decouples from the consumption of finite resources. It is a resilient system that is good for
business, people and the environment.
The circular economy is a systems solution framework that tackles global challenges like
climate change, biodiversity loss, waste, and pollution.
It is based on three principles-
• Eliminate waste and pollution

• Circulate products and materials
• Regenerate nature
In the technical cycle, products and materials are kept in circulation through processes such
as reuse, repair, remanufacture and recycling.
In the biological cycle, the nutrients from biodegradable materials are returned to the Earth
to regenerate nature
30
https://www.macfound.org/about/frequently-asked-questions
https://ellenmacarthurfoundation.org/topics/circular-economy-introduction/overview
https://ellenmacarthurfoundation.org/circular-economy-diagram

4.3 Doughnut Economics
Doughnut Economics is a visual framework for sustainable development – shaped like a

doughnut – combining the concept of planetary boundaries with the complementary concept
of social boundaries. The diagram was developed by University of Oxford economist Kate
Raworth 31 in her 2012 Oxfam paper A Safe and Just Space for Humanity and elaborated upon
30F
in her 2017 book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
and paper.
The Doughnut consists of two concentric rings:
a social foundation, to ensure that no one is left falling short on life's essentials,
an ecological ceiling, to ensure that humanity does not collectively overshoot the planetary
boundaries that protect Earth's life-supporting systems.
The environmental ceiling consists of nine planetary boundaries, as set out by Rock Strom et
al, beyond which lie unacceptable environmental degradation and potential tipping points in
31
https://www.kateraworth.com/doughnut/
https://doughnuteconomics.org/about-doughnut-economics

Earth systems. The twelve dimensions of the social foundation are derived from
internationally agreed minimum social standards, as identified by the world’s governments in
the Sustainable Development Goals in 2015. The doughnut shape basically represents an
environmentally safe and just, space for humanity, only if the social and planetary boundaries
are not crossed.

5.History and Evolution Of ESG
The term ESG was the result of a conference in 2004 that led to the publishing of UN Global
Compact Initiative’s ‘Who Cares Wins’ Report – Connecting Financial Market to the Changing
World in 2005.
Here is a snippet from the report stating the goals of the ESG for businesses and society.
32
31F
32
https://www.unepfi.org/fileadmin/events/2004/stocks/who_cares_wins_global_compact_2004.pdf

As per Corporate Finance Institute (CFI), ESG gained momentum in 2020, even though it has
been there since 2000s. However, the recent focus on ESG is a result of increased regulatory
pressure, changing preferences of customers, climate change risks.
1980s
EHS (Environment Health and Safety)
1990s
Sustainability
2000
CSR (Corporate Social Responsibility)
2020
ESG (Environmental Social and
Governance)
5.1 How The Concept of ESG Evolved
ESG investing began from SRI (Socially Responsible Investing) where in 1960s, some stocks
and investment options were excluded like tobacco, alcohol, apartheid etc.
In 1970 “Shareholder value theory” by Milton Friedman was published, which focused on the
idea that the sole purpose of business is to increase profits. There is a shift from this belief
and rightly so, as it is evident that companies which look beyond profit maximisation are
observing long term sustainable growth.
In 1971 OSHA (Occupational Health and Safety) was officially established in the USA which
basically helped in protecting the health and safety of workers (EHS)
In 1980s Social Responsibility investment gained momentum due to the Apartheid movement
in South Africa

In 1992, UNCED (United Nations Conference on Environment and Development) or Earth
summit happened at Rio de Janeiro, which laid the foundation of UNFCCC, UN CBD and
Agenda 21 and Rio declaration 33 32F
In 1994, John Elkington introduced the concept of The Triple Bottom Line (TBL) as a
sustainability framework that balances the company’s social, environmental and economic
impact.
In 1997, GRI (Global Reporting Initiative) was created, which aimed to provide businesses an
opportunity to take responsibility for their actions and communicate the same through their
reporting framework.
In 2000 UNGC (United Nations Global Compact) was launched. This was a call for companies
to align their strategies and operations with universal principals on human rights, labour,
environment, and anti- corruption.
In 2001 CSR was introduced by the European commission as a distinct strategy, despite the
term being officially coined in 1953. It became essential for many companies in 2000s.
In 2004, “Who cares wins- connecting financial markets to a changing world” came, in which
guidelines to incorporate ESG into business operations were given.
In 2006 UN PRI (Principles of Responsible Investment) reporting framework was launched.

Its principles talk about ESG incorporation and disclosures.
In 2015 SDGs (Sustainable Development Goals) were developed by United Nations General
Assembly. It has 17 goals covering health, education, poverty, climate change, biodiversity etc,
to be achieved by 2030. And the historic Paris agreement to limit global temperature rise was
signed in 2015 as well.
33
https://www.un.org/en/conferences/environment/rio1992#:~:text=The%20United%20Nations%20Conference%20on,from%203
%2D14%20June%201992.

TCFD (Task Force on Climate Related Financial Disclosures) was launched in 2015 by FSB
(Financial Stability Board) to develop a voluntary climate- related financial risk disclosures.
https://npengage.com/companies/esg-history/
https://www.preqin.com/preqin-academy/lesson-5-esg/history-of-esg
5.2 ESG Definition
ESG is a framework that helps stakeholders understand how an organization is managing

risks and opportunities related to environmental, social, and governance criteria (CFI).
With the help of ESG frameworks, investors assess companies on the basis of risk
management and opportunities that may arise due to market and non -market conditions. It
is basically a risk management and investment framework.
ESG focuses on the ability to create & sustain long-term value, and managing the risks &
opportunities associated with these changes.
The term has three components:
Environmental criteria address a company’s operations environmental impact, and its

environmental stewardship
Social criteria refer to how a company manages its employees, customers, supply chain
partners and community.
Governance criteria refers to a company’s leadership & management policy, practices,

internal controls, and shareholder rights.

Key topics
Key Environmental
topics Key Social topics
Key Governance
•Climate change •Human rights Topics
•Natural Resource •Health and safety •Ethics
depletion •Diversity and inclusion •Transparency policy
•Greenhouse gases •Child labour •Antibribery /
•Green buildings •Gender equality corruption
•Water management •Board diversity
•Biodiversity •Shareholder rights
•Pollution and waste •Corporate social
management responsibility
5.3 Key Environmental Topics
• Climate change – According to UN 34, climate change refers to long-term shifts in

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temperatures and weather patterns. These shifts may be natural, such as through
variations in the solar cycle. But since the 1800s, human activities have been the main
driver of climate change, primarily due to burning fossil fuels like coal, oil and gas.
• Resource scarcity describes a situation where the supply of renewable resources –
such as water, forests, rangelands and croplands – is not sufficient to meet the
demand.
The scarcity could be induced due to three reasons:
• Supply induced – it occurs when environmental degradation, pollution, natural
variation or a breakdown in the delivery infrastructure reduces the total supply or local
availability of a specific resource
• Demand induced- it occurs when demand cannot be met by existing supply
34
https://www.un.org/en/climatechange/what-is-climate-change

• Structural scarcity -occurs when different groups in a society face unequal resource
access. 35 34F
• Greenhouse gases -Gases that trap heat in the atmosphere are called greenhouse
gases 36. Carbon dioxide, nitrogen dioxide, fluorinated gases, methane are some of the
35F
examples.
• Green buildings- the practice of creating structures and using processes that are
environmentally responsible and resource-efficient throughout a building's life-cycle
from siting to design, construction, operation, maintenance, renovation and
deconstruction. Buildings can have profound effects, both positive and negative, on
the natural environment, as well as the people who inhabit buildings every day.
 Efficiently using energy, water, and other resources
 Protecting occupant health and improving employee productivity
 Reducing waste, pollution and environmental degradation 37 36F
• Water management - World Bank 38 predicts that with current practices, the world
37F
will face a 40% shortfall between forecast demand and available supply of water by
2030 as the global population is growing fast. Therefore, it is important to conserve
water resources.
• Biodiversity – “Biological diversity" means the variability among living organisms
from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems
and the ecological complexes of which they are part; this includes diversity within
species, between species and of ecosystems.
UN CBD 39 38F
35
https://www.un.org/en/land-natural-resources-conflict/pdfs/GN_ExeS_Renewable%20Resources%20and%20Conflict.pdf
36
https://www.epa.gov/ghgemissions/overview-greenhouse-gases
37
https://archive.epa.gov/greenbuilding/web/html/about.html
38
https://www.worldbank.org/en/topic/waterresourcesmanagement
39

• Pollution and waste management – waste generated is expected to double from 1.2
billion tonnes per year to 2.2 billion tonnes by 2025. 40. 39F
Air pollution is responsible for causing early deaths, heart diseases, neurological
disorders.
Pollution can cause reputational risks, which influences product R&D, retail
expectations and consumer requirements.
Similarly plastic pollution is a menace not only to aquatic biodiversity, but also leads
to greenhouse gas emissions.
5.4 Key Social Topics
• Human rights- UN defines human rights as “Rights inherent to all human beings,
regardless of race, sex, nationality, ethnicity, language, religion, or any other status”.
These rights are aimed at providing right to life, freedom of expression or opinion,
work opportunities and Education. Corporates have a responsibility to protect human
rights and not abuse them.
The Universal Declaration of Human Rights (UDHR) 41, adopted by the UN General40F
Assembly on December 10 ,1948, was the first legal document to set out the
fundamental human rights to be universally protected. It has 30 articles which talk
about civil, political rights, right to life, free speech, liberty, security and other
economic, social, and cultural rights. According to Guiding Principles on Business and
Human Rights businesses should:
(a) Avoid causing or contributing to adverse human rights impacts through their own
activities, and address such impacts when they occur;
40
https://www.who.int/publications/i/item/WHO-HEP-ECH-AQH-2021.8
41
https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf

(b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to
their operations, products or services by their business relationships, even if they have
not contributed to those impacts.
The responsibility of business enterprises to respect human rights applies to all

enterprises regardless of their size, sector, operational context, ownership and
structure.
Business enterprises should have in place policies and processes appropriate to their
size and circumstances, including:
(a) A policy commitment to meet their responsibility to respect human rights;
(b) A human rights due diligence process to identify, prevent, mitigate and account for
how they address their impacts on human rights;
(c) Processes to enable the remediation of any adverse human rights impacts they cause
or to which they contribute
• Modern Slavery
As per International Labour Organisation (ILO), 49.6 million people were living in
modern slavery in 2021, of which 27.6 million were in forced labour and 22
million in forced marriage
Slavery 42 is “All work or service which is exacted from any person under the threat of
41F
a penalty and for which the person has not offered himself or herself voluntarily."
Slavery reduces productivity, creates intergenerational poverty, increases inequality
weakness governance, harms the environment.
• Health and safety- The ILO 43 Constitution sets forth the principle that workers must
42F
be protected from sickness, disease and injury arising from their employment. Similarly
in every country there are laws to protect health and safety of workers.
42
https://www.developingfreedom.org/overview/slavery-development/
43
https://www.ilo.org/global/standards/subjects-covered-by-international-labour-standards/occupational-safety-and-health/lang--
en/index.htm

• Diversity and inclusion- Diversity in the workplace creates healthy and safe
environment, provides equal opportunity to all.
• Child labour- ILO defined child labour as work that deprives children of their
childhood, their potential and their dignity, and that is harmful to physical and mental
development. There are laws in place that prohibit child labour.
• Inequality- UN defines inequality as the state of not being equal, especially in status,
rights, and opportunities.
• Gender Inequality – gender inequality is defined as a legal, cultural, or social situation
where gender determines unequal opportunities and rights for women and men,
whether access to or benefit of rights and assumptions of stereotypical culturally and
socially defined roles. (IGI Global)
As per UNICEF,
Worldwide, nearly 1 in 4 girls between the ages of 15 and 19 are neither employed
nor in education or training – compared to 1 in 10 boys.
• In 2019, before the pandemic, women accounted for 39.4 per cent of total
employment. In 2020, women represented nearly 45 per cent of global employment
losses.
• The share of women in managerial positions worldwide increased from 27.2 to 28.3
per cent from 2015 to 2019, but remained unchanged from 2019 to 2020, the first
year without an increase since 2013. 44 43F
44
https://www.un.org/sustainabledevelopment/gender-equality/

5.5Key Governance Topics
• Corporate Governance-
According to Cadbury Report 1992 corporate governance is
'The system by which companies are directed and controlled'.
As per World Business Council for Sustainable Development (WBCSD)-

Corporate governance is “the system by which companies are directed and controlled
in the interests of shareholders and other stakeholders”.
These are the primary objectives and purpose of Corporate Governance:
45
44F
45
https://kfknowledgebank.kaplan.co.uk/theory-20of-20corporate-20governance

As per OECD Principles of Corporate Governance 46, 2004, corporate governance involves a
45F
set of relationships between a company’s management, its board, its shareholders and other
stakeholders. It also provides the structure through which the objectives of the company are
set, and the means of attaining those objectives and monitoring performance are determined.
Good corporate governance should provide proper incentives for the board and management
to pursue objectives that are in the interests of the company and its shareholders and should
facilitate effective monitoring.
The first principle states that the corporate governance framework should promote
transparent and efficient markets, be consistent with the rule of law and clearly articulate the
division of responsibilities among different supervisory, regulatory and enforcement
authorities.
• Ethics - As per CFI, business ethics are the moral principles that act as guidelines for
the way a business conducts itself and its transactions
• Transparency policy
Information should be accessible to the public and should be understandable and
monitored.
• Accountability
According to UN principles, Governmental institutions, private sectors, and civil
society organizations should be held accountable to the public and institutional
stakeholders.
“Corporate responsibility” refers to the actions taken by businesses in response to

such expectations in order to enhance the mutually dependent relationship between
business and societies” (OECD) 47 46F
46
https://www.oecd.org/corporate/ca/corporategovernanceprinciples/31557724.pdf
47
https://www.oecd.org/daf/inv/corporateresponsibility/1840502.pdf

• Antibribery / corruption - corruption is the abuse of assigned power for private gain,
it should be avoided at all costs.
• Board diversity
As per ICGN (International Corporate Governance Network) 48 global governance 47F
principles board diversity is very important. It improves board quality, which aligns
with improved company financial performance
• Shareholder rights -CFA institute defines shareholder rights as “Shareholder rights

is an integral part of any corporate governance system. These rights ensure that
shareholders are able to voice their opinions on board nominees and other proxy
initiatives, as well as other corporate actions that may affect the value of their
interests”.
• Corporate social responsibility- “CSR is the continuing commitment by business to

behave ethically and contribute to economic development while improving the quality
of life of the workforce and their families as well as of the local community and society
at large.”-WBCSD
All these E, S and G factors are important, however environmental factors which were
otherwise ignored, play an important role in business operations, which is being realised now.
Impact Of Environmental Factors on Corporations
• Physical risks - refers to the physical impacts of climate change such as extreme
weather events, heatwaves, droughts and rising sea levels. It affects supply chains,
transportation routes, health and well-being, leads to resource shortages.
These could be acute or chronic.
48
https://www.icgn.org/sites/default/files/2021-06/ICGN%20Guidance%20on%20Diversity%20on%20Boards%20-%20Final.pdf

 Acute: event-driven, like weather events or;
 Chronic: long-term shifts in climate patterns that may cause sea level rise or regular
chronic heat waves.
• Transition risks- risks associated with the transition to a low -carbon economy. It is
of the following types:
• Market risk -shift in supply and demand of certain products/services
• Policy and legal actions- include carbon pricing mechanisms to reduce GHG
emissions. Legal risks include failure of organisations to comply with climate
regulations.
• Technology risk- technological improvements and innovations are leading the way in
transition to a low carbon economy, which impact the organisations that support this
transition through renewable energy and electric vehicles.
• Reputation risk- Organisations risk jeopardising their customer base and brand value
by failing to contribute towards net zero.
• Human risks- humans will have to migrate in masses due to rising sea level or other
climate events like rising temperatures, natural resource scarcity etc. It would impact
local labour force availability, and required infrastructure
(Source-TCFD)
6.What is CSR and how it is linked with ESG
Industrialist Andrew Carnegie and John D. Rockefeller were some of the early philanthropists
to have generously donated part of their fortune to educational, scientific causes. These acts
can be thought as the starting of CSR.
The term was officially coined in 1953 by American economist Howard Bowen in his
publication Social Responsibilities of the Businessman and he is often referred to as “the
father of CSR”
WBCSD defines CSR as - “CSR is the continuing commitment by business to behave ethically
and contribute to economic development while improving the quality of life of the workforce
and their families as well as of the local community and society at large.”

Corporate social responsibility (CSR) refers to activities that a company undertakes
voluntarily to give back to communities or the environment in the form of donations or
charities. It is a self -regulating model that helps keep a company accountable to itself, and to
all the stakeholders.
CSR initiatives basically help to build a positive brand image.
Generally, the areas chosen are environmental like reducing cleanliness and plantation drives,
community programs which offer education, helps in women empowerment, health and
hygiene etc.
49
48F
As per United Nations Industrial Development Organisation, Corporate Social

Responsibility is defined as a management concept whereby companies integrate social and
environmental concerns in their business operations and interactions with their stakeholders.
CSR is basically maintaining a balance of the economic, environmental and social
requirements, as discussed above the “Triple-Bottom-Line- Approach”, while at the same time
addressing the expectations of shareholders and stakeholders.
49
https://kfknowledgebank.kaplan.co.uk/corporate-social-responsibility-(csr)-
#:~:text=World%20Business%20Council%20for%20Sustainable%20Development%20(WBCSD),-
A%20formal%20definition&text='CSR%20is%20the%20continuing%20commitment,community%20and%20society%20at%20la
rge.

As opposed to traditional views, when CSR was thought as non-contributing to businesses,
lately it has been realised that a coherent CSR strategy actually can help companies in the
following:
• monitor changing social expectations

• manage operational risks
• identify new market opportunities
• retain key employees.
ESG and CSR
 ESG is a performance centric measures of financial and non -financial material factors.
CSR activities are often done to build a positive reputation of firm in the eyes of
consumers.
 ESG reporting and disclosure is performed to fulfil the compliance regulation as well
as for investors and stakeholders. Whereas CSR is voluntary. However, In India,
according to The Companies Act, 2013 provision for CSR under section 135 states
that companies with a net worth of ₹500 crore or more, or turnover of ₹1,000 crore
or more, or a net profit of ₹5 crore or more during the immediately preceding financial
year, to spend 2 per cent of the average net profits of the immediately preceding three
years on CSR activities.
 ESG deals with more quantitative data along with qualitative data, while CSR is
qualitative. ESG is more or less associated with the material risks and opportunities
while CSR is aligned to a company’s values.
 ESG is a primarily risk management and investment framework that seeks to evaluate
the financial risks that ESG factors pose for a company’ s value. It increases the
economic resilience of a company. It is more of an outside -in perspective. ESG is
investor and company centric framework which tries to de risk portfolio.
 Ratings and indices are used by investors to identify ESG stocks to assess the potential
impact of world on company’s value and its shareholders.

 CSR adopts inside-out approach. The company’s effect on the society and the people
is considered. It is people and planet -centric. It can be costly at times, for example,
when it comes to fair wage, to pay everyone in the supply chain would be costly to the
company or for sustainable sourcing, the company would have to shell a lot of money.
Sustainable business comes at a price.
 True sustainability means to let go of some of these returns on investment in exchange
of some positive social and environmental impact.
 At present, ESG has its drawbacks such as lack of transparency, standardisation and
inconsistent ratings, while CSR goes beyond ESG and is for greater good of society,
environment and people. 50 49F
7.What are Sustainable Development Goals and how are they linked with ESG
We have already covered what are SDGs above, in Global Sustainability Initiatives, how
sustainability/ sustainable development came into existence and what were the initiatives
that took place and laid the foundation of various organisations and agreements like SDGs,
Paris agreement etc. emphasising on GHG reduction, sustainable consumption.
7.1 ESG and Sustainability
Sustainability indicators such as SDGs outline the most essential environmental and societal
aspects and ESG also considers these risks in detail. Both share benefit in the long term. Well
managed ESG engagement in corporates help align their investment goals and channel
finances to relevant SDGs. The UN SDGs and their underlying targets can be a reference point
to address the uncertainty related with climate change and other risks. The similarities
between the two can be observed in the image below.
50
https://www.imd.org/ibyimd/sustainability/lets-be-clear-esg-is-not-woke-and-its-different-from-sustainability/

51
50F
Source-Sustainometric
8. Why ESG is Required
Keeping in mind the challenges, investors and consumers are adding pressure to the
companies and organisations that it is high time they take responsibility for their actions and
products and disclose information about their operations and its impact on the environment.
In many countries, ESG reporting is now mandatory for top listed companies. The increase in
regulations related to ESG can be observed in the image below.
51
https://sustainometric.com/esg-to-sdgs-connected-paths-to-a-sustainable-future/

Source: MSCI
https://www.msci.com/who-will-regulate-esg
In India also, SEBI has introduced BRSR for top 1000 listed (by market capitalisation)
Companies, which will be discussed in depth in other modules.

References and Supplementary Readings-
https://www.weforum.org/reports/global-risks-report-
2023/?DAG=3&gclid=Cj0KCQjwk7ugBhDIARIsAGuvgPbWblm9vfQ3Nim50YXQ2H5Yo7rQ
L2o64uje2ewOL96xsStimu6i-asaAoZQEALw_wcB
https://ipbes.net/glossary/biodiversity-
loss#:~:text=The%20reduction%20of%20any%20aspect,extinctions%2C%20resulting%20in
%20decreased%20total
https://ipbes.net/sites/default/files/ipbes_7_10_add.1_en_1.pdf
https://www.pwc.co.uk/issues/megatrends/climate-change-and-resource-scarcity.html
https://www.resourcepanel.org/reports/global-resources-outlook
https://www.overshootday.org/newsroom/past-earth-overshoot-days/
https://www.overshootday.org/newsroom/country-overshoot-days/
https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html
https://www3.weforum.org/docs/WEF_GGGR_2022.pdf
https://www3.weforum.org/docs/WEF_GGGR_2022.pdf?_gl=1*nu57g1*_up*MQ..&gclid=Cjw
KCAjw4c-ZBhAEEiwAZ105RTmEjkB-F__F3wOzAudLImdRgVKc1ETPQfI4n1nULdoJ54zWG-
ESqhoCPQ0QAvD_BwE
https://ourworldindata.org/contributed-most-global-co2
https://ourworldindata.org/co2-emissions

https://www.tandfonline.com/doi/pdf/10.1080/15693430600688831#:~:text=At%20the%2
0start%20of%20the,see%20Ward%20%26%20Dubos%201972).
https://www.imf.org/en/Publications/fandd/issues/2019/12/climate-change-central-banks-
and-financial-risk-
grippa#:~:text=As%20a%20result%2C%20insurance%20is,such%20as%20droughts%20and
%20floods.
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ESG Research Foundation

Pandit Madan Mohan Malaviya National (Knowledge Partner)

What is ESG and Why ESG is required

ESG Research Foundation | Reference Material | Module 1 Page 1 of 51

Let us look at these challenges in detail.

The report can be accessed with link provided below.

Global Risks Report 2023- 98 pages 1 0F

Climate Change is listed as one of the major threats to humanity.

1.1. What is Global Warming and Climate Change

1.1.1. Causes of Climate Change

ESG Research Foundation | Reference Material | Module 1 Page 2 of 51

1.1.3 Impacts of Climate Change 2F

Latest IPCC AR6 Report-Summary for Policy Makers- 36 pages 4 3F

Climate change 2022- Impacts, adaptation and vulnerability 6 5F

ESG Research Foundation | Reference Material | Module 1 Page 3 of 51

Summary for policy makers- 100 pages 7 6F

Technical Summary- 102 pages 8 7F

Full Report- 2258 pages 9 8F

The second challenge is:

1.2 Biodiversity Loss

Drivers of Biodiversity loss

As per Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services

Direct Drivers for Biodiversity Loss:

ESG Research Foundation | Reference Material | Module 1 Page 4 of 51

Indirect Drivers for Biodiversity Loss:

• Demographic and sociocultural

IPBES Report- 45 Pages 12

1.3 Depletion of Resources

ESG Research Foundation | Reference Material | Module 1 Page 5 of 51

has more than tripled from 1970 and is continuously increasing.

Due to resource depletion, there is:

ESG Research Foundation | Reference Material | Module 1 Page 6 of 51

The next challenge is the Rising Inequality.

ESG Research Foundation | Reference Material | Module 1 Page 7 of 51

Three types of inequality are discussed here:

1.4.1 Economic Inequality

Economic inequality is defined as unequal distribution of income and opportunity. Income

ESG Research Foundation | Reference Material | Module 1 Page 8 of 51

1.4.2 Inequality at the Gender Level

ESG Research Foundation | Reference Material | Module 1 Page 9 of 51

The unemployment rate in women is higher as compared to men.

Similarly, women at leadership roles are very few as compared to men.

Source-World gender gap report 2022

The Gender Inequality Index (GII) is a composite measure, reflecting inequality in

• The empowerment dimension is measured by the share of parliamentary seats held by

ESG Research Foundation | Reference Material | Module 1 Page 10 of 51

1.4.2 Carbon Inequality

It refers to the difference in emissions of Carbon dioxide between developing and

ESG Research Foundation | Reference Material | Module 1 Page 11 of 51

ESG Research Foundation | Reference Material | Module 1 Page 12 of 51

From here, basically more emphasis on sustainability was laid upon.

As per Environmental Essay: Sustainable development – historical roots of the concept

ESG Research Foundation | Reference Material | Module 1 Page 13 of 51

3.1 Sustainable Development Goals (SDGs) {2015-2030}

ESG Research Foundation | Reference Material | Module 1 Page 14 of 51

ESG Research Foundation | Reference Material | Module 1 Page 15 of 51

3.1.3 5Ps of Sustainability:

Latest Sustainable Development Goals Report 2023 can be accessed here.

3.2 Conference Of Parties (COPs)

ESG Research Foundation | Reference Material | Module 1 Page 16 of 51

Some of the major outcomes of COPs that have happened are:

ESG Research Foundation | Reference Material | Module 1 Page 17 of 51

COP 21 Paris Agreement, 2015

• The Paris Agreement is a landmark in the multilateral climate change process as it is