Only 8% Indian firms have ESG-related compensation policy: Refinitiv

Though Indian companies’ average transparency rating at 29 per cent is higher than the 26 per cent for the Refinitiv ESG (environmental, social, and corporate governance) universe, only 8 per cent of Indian firms have a policy on ESG-related executive compensation, much lower than the broader universe (25 per cent). 

These findings are part of a new study on ESG, which compares disclosures of 160 Indian companies, mainly included in the MSCI Emerging Markets Index, against those of other countries with similar coverage.

Refinitiv’s ESG database covers 80 per cent of global market cap and the study evaluated data across five key markets — China, Hong Kong, India, South Africa, and Brazil — as well as the overall ESG universe of about 9,000 public companies. 

The top 10 variances for high transparency in India comprise factors such as policy community involvement, policy equal voting right, CSR sustainability committee, internal audit department reporting, policy skill training, policy energy efficiency, and policy business ethics.

India ranked high on policy community involvement with transparency rating of 99 per cent, compared with 80 per cent for the wider universe. On equal voting rights policy it scored 98 per cent, against 97 per cent for South Africa, 95 per cent for Brazil, and 98 per cent for China.

However, a comparative analysis on the bottom 10 variance shows lesser transparency in Indian companies. The transparency rate for carbon offsets/credits is 1 per cent, compared to two per cent in Brazil and Hong Kong. Also, transparency on indirect energy use stood at 1 per cent, against 5 per cent in Brazil.

The study also analysed critical data measures that cover ESG risks and issues such as board diversity, executive pay, climate change, social well-being, and child/forced labour. Transparency rating for business ethics policy in India stands at 94 per cent, compared with 79 per cent for the broader universe. However, the rating for ESG-related compensation policy is seven per cent for India, against 66 per cent for South Africa. 

Indian companies are more transparent on data related to women employees, with a transparency rating of 90 per cent.

Additionally, India scored 81 per cent on adopting policies on bribery and corruption, for running their businesses transparently and accountably, compared to 76 per cent of companies globally. Around 90 per cent of Indian firms’ boards have lesser than 25 per cent of women. The study also observed that less than 20 per cent of Indian companies offer compensation improvement tools for executives, also lower than other markets.

The study emphasised that 84 per cent of Indian companies publish CSR/sustainability reports as compared to only 58 per cent globally.

The study recommended the addition of 35 data measures to the Business Responsibility Report that are applicable to specific principles and are drawn from globally accepted ESG guidelines.