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Amrit Singh Deo's  Instablog

Amrit Singh Deo
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Amrit currently advises a portfolio of global private equity clients, financial services players & select global companies seeking growth in India. An Economics graduate from Delhi University, Amrit is an alumnus of ESADE Business School, Barcelona, Spain. Financial Communications advisor;... More
  • Institutional Money & ESG Disclosure In India 0 comments
    Jan 26, 2012 3:34 AM

    Over 650 global institutional Investors have signed the Priciples of Responsible Investing (NYSE:PRI) about factoring in ESG (Environmental, Social, Governance) disclosure when making portfolio investment decisions. Simply put - if you want our money, be good (& show us how). Something like Santa.

    The kicker being, this Santa has always symbolized Capitalism. And he wants you to be Good. If you've only been a student of classical economics & considered profit-maximization as the holy grail, its time to enrol back into school. The incredulous reception to the centre mandating CSR spending & reporting is similarly, understandable. Not to speak of the Indian metals & mining companies - crying themselves hoarse with an 'its all mine' argument like a petulant child.

    Its time to acknowledge the broader trend. Corporates are being asked to pitch in as social citizens. And pitching in pennies/ paisas isn't enough.

    To be fair, there are plenty of role models in India - the Tatas, Birlas, Godrejs - have made significant contributions towards social institutions. The required mandate has just widened. Its not longer patronage, but a responsibility. For corporates, big or small.

    This means the CFO has to expand the definition of Financial and Investor Communication, to include ESG spending & its governance. This is a management mind shift as well as an organizational change - strategic in nature. ESG spending needs to be considered compliance & brought into the ambit of 'Risk Management' (the absence of ESG being the risk here). It's a long journey for Indian companies - we have industries/sectors which have thrived under the radar, without much scrutiny on their environmental or social impact. As cross-border M&As pick up, and international companies bring with them a more heightened awareness of their social & environmental responsibilities into India - it could re-position many Indian players who are ill prepared to adapt.

    Progressive Indian companies, who embrace this earlier, will be better placed to attract talent, supporters, customers & investments. Resistance is futile.

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