India needs USD 20 billion investments each year to achieve climate targets and fund its green transition: FICCI – Trilegal White Paper on ESG

NEW DELHI, 12 March 2022: FICCI jointly with Trilegal released a white paper ‘ESG – Into the Mainstream’ during FICCI ESG Summit 2022. The report released by Mr Rajesh Verma, Secretary, Ministry of Corporate Affairs, Govt of India comes as at a timely juncture as ESG (Environmental, Social and Governance) considerations are increasingly influencing the way in which businesses measure success. The expectations of key business stakeholders such as investors, regulators, customers, and employees are also bringing these parameters in sharp focus.

The narrative around ESG has changed significantly over the last couple of years, from being seen as a compliance imperative to taking the centre stage at boardroom discussions and driving investment and business strategy decisions. India needs USD 20 billion worth of investments each year to achieve its climate targets and fund its green transition. It needs a large budget allocation, international finance from bilateral and multilateral sources and green private investments. Chapter 1 of the report, Unlocking Green Finance explores India’s readiness to access and deliver climate finance and other related aspects such as uniform carbon tax policy and green taxonomy for enhancing investor confidence. It delves deep into potential sources of finance and novel structures and the need to incentivize investors willing to provide ‘first loss capital’ to de-risk projects and catalyze further investments.

Focussing on Redefining corporate citizenship – the road to sustainability, the report details how corporates can contribute to the sustainability agenda, non-financial metrics and management of ESG risks. As regulators actively incorporate ESG and sustainability factors into the legal framework, the ways in which companies operate will change. The report also explores the themes of ESG Crisis Readiness and Regulation of ESG Ratings Providers in India through global comparisons and makes recommendations on the ESG framework that pre-empts ESG crises as well as handles one responsibly when it arises.

Given that assessment of the ESG metrics is based on softer uncrystallized principles, the report underscores the need for revisiting the requirement for accreditation of ERPs along with proposals for eligibility criteria such as net worth requirements, infrastructure and man-power requirements. A light-touch principle-based regulation coupled with increasing shareholder activism and investor awareness will help set the broader framework within which ERPs operate, and act as a check on the activities of ERPs, which will in turn set the roadmap for corporate governance for the coming decades.

The report also spotlights reforms in power sector for encouraging ESG-led investment in India’s climate transition.