WORKSHOP – SESSION 2

ESG & BUSINESS

Kolkata, 23rd Sep 2023

 AGENDA

1. Introduction to key concepts – E, S, G and materiality mapping

2. Triggers for Indian companies

A. ESG grading
B. Emerging regulations

3. Case studies

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 DEFINITIONS
ESG
 It is a framework used by stakeholders to
ascertain the way a company manages risks and
opportunities related to environmental, social
and governance parameters.
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CSR
Unlike ESG, (i) CSR does not impact business
operations or results, (ii) is carried out with
own funds and (iii) compliance relates to
spending the amount and not with achieving
any specific outcome.
Sustainability
Sustainability allows a company to meet its
current needs without compromising its ability
to meet its future needs.
Triple Bottomline – Planet, People, Profits.
ESG lays down a path to sustainability.
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 COMPONENTS OF E,S,G

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 E N V I R O N M E N TA L FA C T O R S

1. Climate Change

2. Pollution, waste and circular economy

3. Pressure on natural resources – fresh water, land use,

forestry and marine resources, biodiversity loss.

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 E N V I R O N M E N TA L D I S C L O S U R E S & M E T R I C E S

a. Energy consumption
• GHG emissions,
 level of absolute emissions of GHGs
• Air quality, b. Water Utilisation
• Energy management,  costs generated by water usage efficiency
• Water and wastewater management, in operations

• Waste and hazardous materials management, and c. Waste Utilisation

• Ecological impacts.  costs generated from the disposal of

waste in operations

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 G L O B A L WA R M I N G – R I S E I N E A R T H T E M P D U E T O G H G

Surface temperature of Global CO2e emission

earth
(billion tonnes) Global population
(billion)
55
2023 8

2011 7
41
1999 6
35
1987 5

1975 4

1960 3
16
1927 2
8
1804 1
4

1850 1900 1950 1990 2000 2021 Source: https://www.worldometers.info

Source: Our World of Data

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DEFINITION OF SELECT TERMS … (1)

1. Fossil fuels – energy from coal, oil and gas

Scarce and cause 75% of all GHG emissions
While an electric vehicle is a clean form of mobility, while charging it uses electricity that has been made from fossil fuels and the
lithium battery requires mining a rare-earth mineral.
 Responsible mining and circular economy for rare-earth elements
 Recent Mining & Minerals (Development & Regulation) Amendment Bill, includes auction for exploration of lithium
2. Renewable sources – energy from natural sources, continuously replenished like water, sunlight, wind, geothermal heat
India meets 25% of its energy demand from renewable sources incl large hydro plants, solar energy (from 2.6GW in 2014 to
71GW in 2022) and wind energy (from 21GW to 40GW in 2022)
Target – ensure 50% of country-wide energy demand is met by renewable sources by 2030
Battery Energy Storage Systems (BESS) are used to store excess energy from renewable sources. GoI has approved viability
funding of Rs 3760 crore in Sep-23 towards creation of 4000 MWh of BESS projects by FY31. 85% of BESS project capacity would
be provided to power distribution companies, reducing the need for fossil fuel for generation
3. Decarbonization– shifting energy mix from fossil fuel to renewables, increasing energy efficiency, ensuring circular economy.
• Transition finance - financial services are provided to high carbon-emitting industries – such as coal-fired power
generation, steel, cement, chemical, paper making, aviation and construction – to fund the transition to decarbonization.
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 DEFINITION OF SELECT TERMS … (2)
1. Carbon footprint
Measure of GHG emissions released by an entity into the atmosphere (more the emission, higher the footprint)
 Includes direct and indirect emissions, reduced by usage of renewable sources of power, improving energy efficiency, etc
2. Carbon sink
A process that absorbs more CO2 from the environment than it releases – forests, ocean, soil
 Oceans store in marine plant and life (blue carbon) and forests and soil store in trees, vegetation, wetlands, peat bogs
3. Carbon removal
Removing GHG emissions from atmosphere through natural solutions such as reforestation or soil management as well as
technological solutions like direct air capture and enhanced mineralization. Helps to slow down climate change
4. Carbon capture and storage
Trapping carbon emissions by fossil fuel power plants, etc underground before they can escape into the atmosphere
Might be relevant for sector like steel, chemicals and cement that are difficult to decarbonize
5. Carbon markets
Trading schemes that provide financial incentives that reduce or remove GHG
 Carbon credits can be purchased by those who are lagging on environmental parameters from those who have attained
their environmental targets (1 tradeable carbon credit = 1 ton of CO2 or equivalent of GHG reduced / removed)
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DEFINITION OF SELECT TERMS … (3)
1. Climate adaptation strategies
Actions that reduce vulnerability to impacts of climate change – Doing things differently
 Planting drought-resistant varieties of crops, improving water storage and usage, managing land to reduce wildfire risks,
build stronger defences against floods, enhancing early warning systems related to disaster information, relocating coastal
infrastructure affected by sea rise

2. Climate change mitigation

Action taken by different entities to (i) reduce or prevent GHG emissions and (ii) enhance carbon sinks that remove these gases
from the atmosphere
 Reducing or preventing through usage of renewable sources of energy, higher energy efficiency, low-carbon transportation,
sustainable agriculture, changing production and consumption models, and diet patterns
 Enhancing carbon sinks can be achieved by restoring forests, wetlands, and marshlands, maintaining soil health, and
protecting terrestrial and marine ecosystems
• Climate finance
Financial resources and instruments to support action on climate change
• Can be private or public, national or international, multilateral
• Grants, donation, green bonds, concessional loans, etc.
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DEFINITION OF SELECT TERMS … (4)
1. Types of emissions–
• Direct emissions – Scope 1 (e.g. running boilers and its vehicles), and Scope 2 (purchased electricity)
• Indirect emissions – Scope 3 (purchased goods and services, its value chain) – typically 70% of its GHG emission
2. Circular economy– design, manufacturing, use and disposal – broader concept than just recycling
• Extended Producer Responsibility – Producers given significant responsibility for treatment or disposal of waste post
consumption – done through reuse, buyback or recycling. Two regulations in place in India – E-waste and plastic recycling
3. Blue economy
• Sustainable economic development of oceans and coastal areas
 Fisheries, tourism, maritime transport, offshore renewable energy, marine biotechnology, etc
4. Bluewashing
• Deceptive marketing that overstates a company's commitment to responsible social practices
• Company uses active disinformation as a tool to make their goods and services attractive to customers
5. Greenwashing
Mis-leading claims made by companies on their sustainability efforts to convince customers / investors that a lot of positive
environmental action is being taken at their end. May be intentional or unintentional
• Audit and assurance is thus becoming an important of the government’s roll-out on green initiatives
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DEFINITION OF SELECT TERMS … (5)

 Carbon neutrality and Net Zero - While both address the same issue of harmful atmospheric emissions, net zero is a broader term
than carbon neutrality, and has a longer time horizon than carbon neutrality.

Carbon neutrality implies that a company will reduce CO2 from the atmosphere that is equivalent to the amount of CO2 that it
has emitted and covers only direct emissions (Scope 1 & 2) for the company or a specific product or service.
Net zero refers to the actions taken to remove GHG emissions from the atmosphere that is equivalent to the quantum of GHG that it
has created and seeks to take out an equivalent amount of GHG from the atmosphere. Net zero includes the company and its entire
value chain, and includes direct and indirect emissions (Scope 1, 2 and 3). This is aligned with the goal towards 1.5⁰C.

1. Carbon neutrality – must offset x tonnes of CO2 emissions, either by creating carbon sinks like afforestation and / or by buying
carbon credits. If a company can obtain sufficient carbon credits and take up environment positive activities that offsets the entire x
tonnes of CO2 emission, it is deemed to be carbon neutral.
2. Net zero – must remove the x tonnes of GHG emissions through technology (carbon removal / carbon capture and storage) and /
or natural means (forest cover creation, etc), and any residual amount can be neutralized with carbon removal credits.

 India has a goal of becoming net zero by 2070, world by 2050, China by 2060

 Infosys a carbon neutral company since 2020

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G O V E R N M E N T O F I N D I A’ S PA N C H A M R I T S T R AT E G Y, C O P 2 6

1. Reach 500GW Non-fossil energy capacity by 2030.

2. 50 per cent of its energy requirements from renewable energy by 2030.

3. Reduction of total projected carbon emissions by one billion tonnes from now to 2030.

4. Reduction of the carbon intensity of the economy by 45 per cent by 2030, over 2005 levels.
5. Achieving the target of net zero emissions by 2070.

KEY ENABLER – Climate finance – asked for $1trillion for

India over the next decade

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 K E Y S O C I A L E V E N T S T H AT I M PA C T S TA K E H O L D E R S

• Globalisation (outsourcing),
• Urbanisation & mass migration,

• Income inequality,
• Automation & AI,

• Digital technology,
• Changing demographics and lifestyle,

• Climate change,

• Water scarcity.

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 I M PA C T O F S O C I A L FA C T O R S O N S TA K E H O L D E R S

• On internal stakeholders • On external stakeholders

a. Human Rights
b. Labour Rights
c. Working conditions
d. Health and Safety
e. Employment standard
f. Human capital development
a. Stakeholder opposition
b. Controversial sourcing
c. Product liability and consumer protection
d. Social opportunities
e. Animal welfare and antimicrobial resistance

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 I M PA C T O F S O C I A L FA C T O R S O N T H E C O M PA N Y

a. Occupational health and safety issues (accident and fatalities), which can result in huge fines and
liabilities;

b. Human capital management issues, which can lead to greater operating costs if new employees need
to be trained due to high employee turnover;

c. Supply chain issues, which can impact brand reputation and revenues if consumers choose to
boycott certain products;

d. Local protests that lead to business disruptions at plants or factories; and

e. Poor working conditions, which can result in issues with product safety.

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 G O V E R N A N C E FA C T O R S

 Corporate governance is the process and structure for overseeing the business and management
of a company.
• From the Latin word for the steering of a boat, gubernare, governance incorporates that
sense of guiding and controlling

 Related to accountability and alignment

 The effectiveness of the board depends on whether good corporate governance practices
are applied

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 I S S U E S I N V O LV E D I N G O V E R N A N C E FA C T O R S

• Shareholder rights
• Effectiveness of leader
• Executive pay
• Audit practices
• Board independence and expertise
• Transparency and accountability
• Related party transactions
• Dual class share structures

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BOARD COMPOSI TI ON I N I N DI A

 Section 149 of the Companies Act, 2013 requires that every company shall have a minimum number of
3 directors in the case of a public company, 2 directors in the case of a private company, and 1 director
in the case of a One Person Company.

 A company can appoint a maximum of 15 fifteen directors.

 A company may appoint more than fifteen directors after passing a special resolution in general
meeting and approval of Central Government is not required.

 The maximum number of directorships a person can hold, is 20.

 At least one woman director shall be appointed in every listed company (from 2014 onwards)

 All listed companies to have at least 1/3rd of total directors as Independent Directors

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BOARD COMMI T TEE

• Audit Committee – at least 3 members, with 2/3rd being ID; Chairperson shall be ID
 Oversees financial reporting and the audit
• Nomination & Remuneration Committee – at least 3 members, with half being ID
 Seeks to deliver a proper alignment of interests through executive pay
• Stakeholders Relationship Committee – chairperson to be a non-executive director
• Look into the mechanism of Redressal of grievances of shareholders, debenture holders
and other security holders
• Risk Management Committee
• Along with directors, senior company personnel to be members of the Committee
• CSR Committee
• For companies where CSR activities are being undertaken

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C O R P O R AT E M I S S T E P S … ( 1 )
• ENRON– largest seller of natural gas in US in 1992, m-cap $60bn in 2000, revenue of $50bn in Jul-01
 Declared bankruptcy in Nov-01 – accounting fraud, poor financial reporting, hid losses, CEO compensation
• Led to dissolution of Arthur Anderson (auditor)
• Sarbanes-Oxley Act, 2002 – laid down audit standards
• HIH Insurance, Australia – $8bn in assets, largest collapse in Australia, went into liquidation (2001)
 Fraud – stock price manipulation, dissemination of incorrect information, dishonesty
• TYCO– security systems company, senior mgmt. unable to explain $600mn usage of company funds (2002)
• Illegal financial transactions by CEO, co-mingling of assets, tax fraud, improper audit, $150mn compensation
• WorldCom – largest long-distance telephony company is USA; fraud estimated at $79.5bn; declared fraud in 2002
• Used questionable accounting practices to inflate profitability
• Ahold – Dutch MNC retail company; criminal investigations by Dutch & US law enforcement, 2004; paid fines EUR8mn
• Accounting irregularities in subsidiaries and JVs.

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C O R P O R AT E M I S S T E P S … ( 2 )
• Parmalat– Italian diary giant – 35,000 employees and EUR6bn sales, Europe’s biggest fraud, filed for bankruptcy in 2003
 Overstated sales and profit for more than a decade; debt much higher than reported and bank account did not have the
amount that the company had declared as the balance
• Olympus– optical equipment manufacturer, Japan; sales of $10.6bn and 40,000 employees in 2011. Stock price nose-dived
after the allegations were made public, directors resigned and other restructuring
 Irregular payments for acquisitions leading to asset impairment charges
• Volkswagen– cars recalled worldwide, company reported losses, paid fines of EUR1bn
• 11mn cars worldwide had been fitted with the defeat device / software – which could detect when it was being
tested and modify results –engines emitted 40times more than the permissible level of emissions
• Daily Mirror – English newspaper founded in 1903, declared bankruptcy in 1992, owner committed suicide - 1991
• Kept transferring money between group companies to show those were profitable, diverted money from the
pension fund account of Daily Mirror to prop up share price
• BCCI – Bank of Credit & Commerce International, UK – set up in 1972 and became 7 th largest private bank by 1982 – 400
branches in 78 countries and $20bn in assets – liquidated in 1991
• Money laundering, involvement in organized crimes
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S H O R T-T E R M I S M V S L O N G -T E R M I S M

 “… short-term strategies are often based on accounting-driven

metrics and profit maximization that fail to fully reflect not only “.. an almost exclusive long-term
the complexities of corporate management and investment, but outlook tend to execute poorly,
also the significant opportunities and risks associated with never really produced results and
these strategies.”
suffered from a lack of
 “The most prevalent accounting-driven metric is the earnings accountability. Every
per share (EPS). Research by scholars John Graham, Campbell underperforming period was met
Harvey and Shivaram Rajgopal has shown that managers are with explanations and
making real decisions – such as decreasing spending on
rationalizations to explain away
research and development, maintenance and hiring of critical
the problem…”
employees – in order to hit quarterly earnings targets they have
provided as part of their own guidance…”
Source: Milano, 2022
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B A L A N C I N G T H E T W O – O W N E R S H I P C U LT U R E
 “… overemphasize neither the short-
nor the long-term. They realize it is not
a case of choosing one or the other; it’s
about both. They push the
organization to maximize near-term
performance, but they would never cut
investment to meet short-term
expectations.…”
Source: Milano, 2022
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Linking CEO compensation to ESG
Among the companies using ESG measures, 43% set human
capital goals (such as diversity, employee engagement, and
a positive company culture); 25% set health, safety, or
environmental goals; and 32% use both types. Utilities and
energy companies have the highest prevalence of ESG goals
(81% and 77%, respectively), typically related to health,
safety, and the environment.
Source: HBR article, 2021
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 M AT E R I A L I T Y A S S E S S M E N T S

• The first step of a financial materiality or risk assessment could be to determine

what the impact of environmental and social factors and trends could be on the
investee companies in the different sectors, operating in the different countries
• Qualitative and quantitative

• Where should investors start when implementing social factors in their investment
decision?
a. Identify social factors which are more financially material or significant
b. Identify and assess how companies are exposed to these identified social factors
c. Identify how companies are managing these risks
d. Identify critical social factors in the supply chain

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 E X A M P L E S O F S E C T O R A L M AT E R I A L FA C T O R S

• Commercial banking
• Apparel, Accessories & Footwear • Data security
• Product quality & safety • Access and affordability
• Supply chain management – • Product design and lifecycle
environment & labour issues management
• Materials sourcing & efficiency – • Business ethics
sustainability in raw material sourcing • Systemic risk management

• Software & IT services • Automobiles

• Energy management – environmental footprint • Product quality & safety
of hardware infrastructure • Labour practices
• Customer privacy • Product design and lifecycle
• Data security management – fuel economy
• Employee engagement, Diversity & Inclusion • Material sourcing & efficiency
• Competitive behaviour – IP protection Source: SASB
• Systemic risk management
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I D E N T I F I C AT I O N O F S TA K E H O L D E R S A C R O S S VA L U E C H A I N

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 S TA K E H O L D E R M A P P I N G & M AT E R I A L I T Y
ASSESSMENT – RELIANCE INDUSTRIES

https://www.ril.com/ar2022-23/understanding-the-material-issues.html

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 AGENDA

1. Introduction to key concepts – E, S, G and materiality mapping

2. Triggers for Indian companies

A. ESG grading
B. Emerging regulations

3. Case studies

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 DEMAND TRIGGERS

• Recent regulatory push is making ESG both a risk and opportunity for all entities
• Incorporation of ESG factors in credit risk models
• In addition to traditional factors of financial, business, industry and management, other
parameters like alternate data and ESG being incorporated
• Recent news item about SBI planning to do ESG profile of its 33 trillion borrowers
• Incorporation of ESG factors in portfolio construction (for investing)
• Issuance of green bonds
• ESG rating / grading of corporates
• Guidelines by GoI on BRSR reporting, Green credit, Carbon credit, Extended Producer Responsibility
• Cross-border trade tariff – Imposition of Carbon Border Tax by EU
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BOARD OVERSI G HT

• ESG committee at board level already exists in many places; might get mandated in future
• May be with CSR committee or stand-alone

• Indian Institute of Corporate Affairs (IICA) is creating a National Association of Impact

Leaders (NAIL) of IICA trained and ESG certified professionals
• Started in Jan-23 (each batch = 50); 2nd batch ongoing
 E S G R AT I N G / G R A D I N G

• ESG grading – typically investor-pay model.

• Done by MSCI, DJSI, Sustainalytics based on availability of public domain information - data

and policies.

• SEBI has come out with a guideline for ESG Rating Providers – can be subsidiary of a credit

rating agency or any other company complying with the guidelines

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TA X O N O M Y O F E A N D S FA C T O R S F O R O I L A N D G A S
(BLOOMBERG)
Social factors
Environmental factors
Community rights & Community relations,
Air Quality Air emissions & its policies relations Human rights
Climate exposure Transition risk Ethics & compliance Business ethics,
Competitive behaviour,
Ecological impact Ecosystem protection, Legal & regulatory
Environmental incidents & fines management
Energy management Energy consumption, Purchased Labour & employment Training
electricity practices
GHG emissions management GHG emissions & its policies Occupational health & Fatalities, Health &
Hazardous waste management Hazardous waste generation & safety management safety policies, Safety
recycling incident rate
Wastewater management Wastewater management Operational risk Operational incidents
management & preparedness
Water management Water use and its policies

Source: Bloomberg
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M S C I A P P R O A C H A N D R AT I N G S F O R O I L & G A S
SECTOR
E/S/G Parameter Weightage
Environment (41%) Carbon emissions 14%
Bio-diversity & land use 14%
Sector – Energy;
Toxic emissions and waste 13%
Sub-sector –
Integrated Oil & Gas Social (26%) Community relations 13%
Health and safety 13%
Governance (33%) Governance 33%

Sinopec SourceMSCI

Aramco
Recent MSCI ratings
Hind Petroleum
of select companies
Indian Oil
Reliance Exxon Mobil ONGC

AAA AA A BBB BB B CCC

SEP 2023,
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GREEN BONDS IN INDIA
 Green bonds are fixed – income financial instruments to fund projects that have positive environmental and or climate
benefits (e.g. renewable energy / green buildings)

 First issued in 2007 (2014-15 in India) and market has seen explosive growth.
Global market at $130 trillion, Indian issuances expected to be around $1 trillion in 2023.
Cumulative Indian issuances $43 bn from 2014-15 till 2021, with > $6bn in 2021

 Almost 5000 green bonds issued till 2021 by Indian banks / issuers, 76% $ denominated, maturity typically < 10 years
(though exceptions are there)
Issued by Indian banks (Yes Bank, Axis Bank, SBI) and NBFCs (REC, IRFC) to fund their growing lending programme to
support India’s energy transition.
Indian issuers (Renew Power, Torrent Solargen, Azure Power, JSW Hydro, Adani Green, ACME Solar, etc) are also issuing these
to access global / Indian capital markets and fund their clean energy initiatives
Pre-issuance verification required for use of funds (typically KPMG, EY, etc)
Borrowing costs were typically higher than ‘normal’ bonds – situation is getting addressed.

S E P 2 0 2 3 , S U S H M I TA G H ATA K Source: public domain, Climate Bond Initiative, RBI 35

 BRS R R EP ORT I N G

• BRSR – Business Responsibility & Sustainability Report

• General disclosures about company - mandatory
• Management and policy disclosures with targets / goals - mandatory
• Principle wise disclosure on 9 basic principles – categorised as two categories – voluntary disclosure
on leadership indicators and mandatory disclosure on essential indicator
• Data-intensive – about 120 data points across all function

• Mandatory for top 1000 companies from FY23

• SEBI Circular of 12-Jul-23 – new compliance for top1000 NSE-listed companies starting FY25 for top250,
and then progressively moving to all
• Make ESG disclosures for 75% of supply chain on comply-or-explain basis

• Automated reporting platforms available in the market to report data as per different standards

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 BRS R R EP ORT I N G
Alignment with SDG
•PRINCIPLE 1: Businesses should conduct and govern themselves with integrity, and
in a manner that is Ethical, Transparent and Accountable.
•PRINCIPLE 2: Businesses should provide goods and services in a manner that is
sustainable and safe.
•PRINCIPLE 3: Businesses should respect and promote the well-being of all
employees, including those in their value chains.
•PRINCIPLE 4: Businesses should respect the interests of and be responsive to all its
stakeholders.
•PRINCIPLE 5: Businesses should respect and promote human rights.
•PRINCIPLE 6: Businesses should respect and make efforts to protect and restore the
environment.
•PRINCIPLE 7: Businesses, when engaging in influencing public and regulatory policy,
should do so in a manner that is responsible and transparent.
•PRINCIPLE 8: Businesses should promote inclusive growth and equitable
development.
•PRINCIPLE 9: Businesses should engage with and provide value to their consumers
in a responsible manner.

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C R O S S B O R D E R T R A D E R I S K S F O R C O R P O R AT E S

 18th April-23 – EU Parliament passed legislation for implementation of Carbon Border Adjustment Mechanism (CBAM)
• Will enable EU to impose a Carbon Border Tax on specific imports such as steel, aluminium, fertilizer, cement, electricity and
hydrogen from Jan-26. Inclusion of more sectors after 2026, and cover all by 2034
• Tax is equivalent to the fee imposed on EU producers who have to comply with EU’s Emission Trading System, and ensures
that non-EU producers do not enjoy an unfair advantage vis-à -vis EU producers
• From Oct-23 to Dec-25, reporting on carbon content of exports to EU to be declared by non-EU producers to EU importers
(both direct and indirect CO2 emissions)

 Proposed methane regulations for oil and gas industry at draft stage in EU and USA
• Been at WIP stage for a while – no clarity on likely date of finalization

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E X T E N D E D P R O D U C E R R E S P O N S I B I L I T Y F O R C O R P O R AT E S

 EPR responsibility under E-Waste (management) Rules, 2016 stipulates collection targets of E-Waste for
producers, whether be it in weight or number, which has risen from 30% in Year 1&2 to 70% in Year 7
• Implementation of EPR responsibility by producers either through the take-back system or by setting
up collection centres or both to channel the E-Waste to registered recyclers or dismantlers.

The Plastic Waste Management (Amendment) Rules, 2022, which provide guidelines for strengthening the circular
economy of plastic packaging waste as well as promoting alternatives to plastic.

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O P P O R T U N I T I E S F O R C O R P O R AT E S

 28th Jun-23 Min of Power (MoP) notification – Carbon Credit Trading Scheme 2023
 MoP based on recommendations of BEE & National Steering Committee on Indian Carbon Market will decide on list of
sectors and obligated entities who will be mandated to record and maintain the GHG emissions intensity data and attain
the targets
 Those who over-achieve will receive certificates that can be sold to those who have under-achieved (1 carbon certificate
= 1 ton of CO2 equivalent) on a trading platform. Can sell overseas but need to first meet our NDC obligations.

 26th Jun-23 Min of Environment, Forest & Climate change draft notification – Green Credit Programme
• Market based mechanism for providing incentives in the form of Green Credits to entities for positive environment actions –
for tree plantation, water conservation, reducing air pollution, sustainable building, etc. Can be traded on a domestic
platform. May also get carbon credits for the same activity under carbon market
• At the draft stage – details on benchmarks, etc awaited. To be finalized after consultations with industry / experts.

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G R E E N I N I T I AT I V E S – S E L E C T E X A M P L E S
 MRPL
Criteria for green belt - Fast growing large evergreen canopy cover, large leaf index and resistance to pollutants and adaptable
to agro-geo climatic conditions, less water stress
Trees planted - Acasia, Bauhinia, Cashew, Casuarina, Eucalyptus, Glyricidia, Gulmohar, Hopia, Jackfruit, Mahagony, Mango,
Sonmohar, Rain tree, Soapnut, Spathodia, Tamarindus, Teak, Vetiria
 Essar /Nayara (Vadinar refinery)
 950 acres of green belt with 100 species of trees and drip irrigation. Employment to 300 local people and a natural
habitat for birds. Fresh water for plants and vegetables, treated water for trees.
 Neem, Karanj, Sonmohar, Aus Babool, Cassid, Karanj, Tabubiya, Alstonia, Casurina, Bahumia, Ambali, Goras Ambli,
Areca palm, Champa, Drumstick, Gulmohar, Ashokpalav, Banyan, etc
 20 species of fruit trees - Guava, Jamun, Pomegranate, Sapota, Fig, Dragon fruit, Apple, Custard Apple, Tamarind
Almond and 100,000 mango trees
 30 seasonal vegetables, gardens of decorative flowers and medicinal plants
 Tree wall of casurina around the belt to protect trees for harsh sea winds
 175 hectares of mangrove plantation and increase to 275 hectares by 2025; 300,000 trees in green belt – increase by
25% by 2025
 10MW solar plant to mitigate 20,000 tons of emissions / year (under construction)

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 B E N E F I T S T O C O R P O R AT E S I N A D O P T I N G E S G

 Compliance with regulations

 Access capital – human & financial
 Launch new products and services and address new market
 Avoid failures / challenges – Theranos, Pacific Gas & Electricity, Byju’s, Satyam, Sterlite Copper
 Research has shown (i) higher profits for companies that pursue ESG strategy (provided
fundamentals are strong) and (ii) rising importance of non-financial factors in valuation

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 AGENDA

1. Introduction to key concepts – E, S, G and materiality mapping

2. Triggers for Indian companies

1. ESG grading
2. Emerging regulations – BRSR, EU

3. Case studies

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C H O S E N C O M PA N I E S

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G H ATA K 44
Source: public domain
 S T E R L I T E C O P P E R - O V E RV I E W

 Since its inception in 1996, Sterlite Copper has steadily grown to become one of the leading contributors to
copper production in India, contributing upto 36% of India’s demand for refined copper.

 Currently, it operates a 400,000 Metric Tonnes Per Annum (MTPA) Copper Smelter with associated facilities such
as a Refinery and Copper Rod Plant, a Sulphuric Acid plant of more than 12,00,000 MTPA and a Phosphoric Acid
plant of 220,000 MTPA at Thoothukudi, Tamil Nadu.
• Sterline Copper also operates a 160 MW coal based power plant in Thoothukudi, Tamil Nadu.

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 STERLITE COPPER – ESG ISSUES
 1994 – TN Pollution Control Board gives NoC and company starts construction, despite protest from locals citing
environmental concerns. Company taken to court in 1996 over environmental clearances – licenses granted;
 1997 – local villagers fall due to pollution
 1998 – National body says that per rules plant should have been 25km from Gulf of Mannar, but actually 14km
 1999 – 2001 – Complaints of gas leak and toxic waste released in water
 2010 – 2013 – Lower courts order closure of plant due to pollution, gets go-ahead from higher courts, Rs 100 cr fine
 2018 - Protest by local villagers and TNPCB refusing renewal of licenses, more than 12 local protestors killed in
police firing and plant closed
 Apr-2023 – Supreme Court allowed plant to open for maintenance purposes
 May-23 – Company sets up 32-acre biodiversity park at Thoothukudi

• India has become a net importer of copper due to this closure

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 PA C I F I C G A S & E L E C T R I C C O M PA N Y

 Pacific Gas and Electric Company, incorporated in California in 1905, is one of the largest combined natural gas and
electric energy companies in the United States

 The company provides natural gas and electricity to 16 million people throughout a 70,000-square-mile service
area in northern and central California.
 Investigations by the California Department of Forestry and Fire Protection assigned primary blame to the
company for two separate devastating wildfires in California – due to faulty equipment of PG&E. The formal finding
of liability led to losses in federal bankruptcy in January-19 , PG&E soon announced its filing for bankruptcy
 Exited bankruptcy in Jun-20

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 THERANOS

 Touted in early-2000s to have breakthrough health technology company

• Automation of blood tests using very less amount of blood – turned out to be false claim
 Was able to attract investors, high-profile board members and had a valuation of $10bn upwards in 2013-14

 Article by Wall Street Journal and other academicians questioning company’s claim. Investigations followed and
company was dissolved in 2018
 Founders jailed

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 S AT YA M

 India’s first corporate fraud – happened in 2010. At that time, Satyam was India’s 4 th largest IT company. Was a
pioneer in introducing internet in India – Sify, and was one of the first Indian companies to list on NASDAQ, 1999

 The founder and directors of India-based outsourcing company Satyam Computer Services, falsified the
accounts, inflated the share price, and stole large sums from the company.
• Much of this was invested in property, MATYAS

 The swindle was discovered in late 2008 when the Hyderabad property market collapsed, leaving a trail back to
Satyam. Chairman Raju confessed that the company's accounts had been falsified – embezzled Rs 7000 crore

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 BYJU’S

 Few red signals on the edtech company (source: news in public domain) –
• Headcount – 58,292 (May-22), 24,787 (May-23)
• Moved out of large rental properties in Bangalore
• Auditor and three directors have resigned
• Has problem of repayment of its term loan

• Concerns on its earlier $22bn valuation

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 ASSIGNMENT

 Company will have a published BRSR report

• If FY23 not available, please communicate to PGP office and a new company will be allotted

• Pg 1 – Profile of company – business, offerings, locations, headcount

• Pg 2 – Comparison with peer on financials – last 3 year, revenue and PBT
• Pg 3 – Vision, mission and purpose of company
• Pg 4 – Stakeholders and key material issues
• Pg 5,6,7 – Response to key E,S,G issues
• Pg 8 – ESG grading of the company (public info) and any recommendations for the company

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 ANNEXURE

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 R E P O R T I N G S TA N D A R D S – N O S I N G L E B O D Y

 Carbon Disclosure Project, 2000 set up by not-for-profit charity – runs the disclosure system for investors, companies, cities, etc
to manage environmental impacts

 Global Reporting Initiative, 2000 & 2021 – in cooperation with UNGC launched sustainability reporting standards – used widely

 Sustainability Accounting Standards Board, 2011 (SASB) – standards for 70+ industry categories with materiality maps.

 Taskforce on Climate-related Financial Disclosures, 2015 – disclosure on Governance, Strategy, Risk, Metrices

 Double materiality reporting, 2019 – introduced by EU on how climate impacts business and the way business impacts climate

 International Sustainability Standards Board, 2021 – set up after COP26, Glasgow – merges SASB, TCFD, etc. Rolled out IFRS
Sustainability Disclosure Standards in Jun-23; if IFRS not available, then guidance is to use SASB

 Corporate Sustainable Reporting Directive, effective 2024 - requires companies to disclose material sustainability metrics, set
targets and report progress. Third-party assurance becomes mandatory

 SEC Climate Disclosure Proposal, US – WIP – disclose Scope 1 and 2, and also Scope 3 – if material targets have been set

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Sushmita.ghatak@yahoo.com
+91 9831097745

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