It is not just green activists and consumers who are putting companies through a wringer. Investors too are asking companies about their carbon performance, to gauge the perceived risk associated with their investments due to climate change.
The launch of a carbon index on the Bombay Stock Exchange earlier this month was an indicator of the growing concern of investors. First of its kind in India, it would track stock performance of a company and map it to carbon emission performance.
“Climate change issues have significant impact on long-term sustainability of organisations. There are both challenges and opportunities. Reduced carbon emission is related to energy savings or improved bottom line. Therefore, economic growth with lower carbon-growth elasticity is the imperative of the day. The investors are more aware on this and, hence, closely considering carbon related disclosures for their decision making,” said Dipankar Ghosh, partner for climate change & sustainability services at Ernst and Young.
“Investors certainly pay attention to this business-impacting area of sustainability,” says Reji Kumar Pillai, a member of Indian Angel Network and president of India Smart Grid Forum.
He feels the next leaders in industry would emerge from among companies that demonstrate the vision to integrate carbon footprint reduction and other sustainability factors in core business strategy and operations.
Earlier this year, investment consultancy Mercer had released a report concluding that the best way for institutional investors to manage portfolio risk associated with climate change might be to shift 40 per cent of their portfolios into climate-sensitive assets, with an emphasis on those that can adapt to a low-carbon environment.
There is no regulatory requirement for Indian companies to make public their emissions or green policies. According to a survey by a UK-based non-profit, Environmental Investment Organisation, just seven per cent of Indian companies give out complete and verified data about carbon emissions. Although some like Procter & Gamble and ITC talk about it in their annual report, there is no third party audit report certifying that.
However, leading companies have a strong sense of the potential impacts of climate change on their bottom-line performance. The board of directors and senior management in these, such as TCS, YES Bank, GVK or Wipro oversee climate change issues, indicating the growing need for integrating climate change strategy with business strategy.
CDP (Carbon Disclosure Project) executive chairman Paul Dickinson said, “Indian industry is showing increasing interest in the enormous commercial opportunities presented by sustainability.”
CDP works with investors globally to advance investment opportunities and reduce the risks posed by climate change, asking about 6,000 of the world’s largest companies to report their climate strategies.
The growing interest is echoed in a recent speech of Gregory Barker, minister of state for climate change in Britain. He said the best way to attract the attention of business leaders and investors is to give them the numbers on greenhouse gas emissions.
“Energy efficiency and resource use efficiency are of competitive interest for all businesses and lead to sustainability,” he added.
