Information from newly listed companies on ESG parameters increases: study

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The average disclosures provided by newly listed companies on environmental, social and governance (ESG) metrics increased by 40% after IPO and subsequent listing, although this is not currently required.

Additionally, there was an average 50% increase in ESG scores for most companies between 2018 and the time they were listed, reflecting the importance of transparency in the ESG journey. According to research by ESG Risk Assessments and Insights (ESGRisk.ai), many companies have begun to disclose their ESG practices through sustainability reports, ESG reports, Sebi guidelines and sustainability goals, among others.

In the environment category, newly listed companies provided the highest information on biodiversity impact and energy efficiency, water efficiency, environmental management and greenhouse gas emissions Greenhouse (see table). In the social category, community support and development, data privacy and security, employee development, and product quality are ranked among the highest.

In the governance category, companies contributed the most to committee functioning, audit committee functioning and board independence, financial audit and control, and structure and functioning of the board of directors, according to the report.

The report analyzed 48 companies that raised funds through IPOs and listed in FY21. These were also among the top 1,000 listed companies (by market capitalization). ESGRisk.ai is a wholly owned subsidiary of Acuité Ratings and Research and is part of the Acuité Group.

Although not mandatory to report disclosures under listing regulations at present, it is expected to become so from FY23 for the top 1,000 listed companies.

According to the study, the textile industry’s transparency score increased 9% in FY21 from the prior year period and topped the rankings. This is followed by the computer services industry and the paper and paper products industry (7%), banking services (6%) and pharmaceuticals (4%). However, the transparency scores of sectors such as civil engineering (-21%), automotive (-7%), beverages (-5%) and telecommunications (-4%) fell.

“It is seen that a significant portion of the top ESG rated companies come from the polluting industry. This clearly shows that these companies have realized how responsible management of resources, fairness to all stakeholders and stewardship of environment are the only ways to achieve long-term sustainable success,” Sankar Chakraborti, president of ESGRisk.ai and CEO of Acuity Group, said.

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ESGRisk.ai, which also rated controversies at NSE 1000 companies in FY21 according to ESG metrics, found that the greatest number of failures occur in the business ethics category , followed by employee safety and environmental management.

Controversies, which are an essential part of the ESG risk management framework, also occur in areas such as environmental management, product liability, data privacy and security, among others. Interestingly, even when there are highly polluting industries such as oil, metals and mining, tobacco among others, the banking and financial services industry is riddled with controversy, where the greatest number of failures is observed in business ethics (34%), as per the study.

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