Demand Guidelines for Socially Conscious Investing During Climate Crisis

Target: Shaktikanta Das, Governor of the Reserve Bank of India

Goal: Actively develop sustainable investing guidelines for the Indian banking structure.

A recent survey conducted by the Indian Banks’ Association on behalf of the central bank reveals a grim landscape for funding Environmental, Social, and Governance (ESG) projects. The survey cited a lack of clarity on how the banks should adopt ESG guidelines, especially for medium and small domestic banks. The Reserve Bank of India (RBI) has earlier acknowledged the climate change criteria as an index for calculating financial risk and is likely to appropriate the survey findings to issue guidelines somewhere later this year. However, the survey might be an elaborate eyewash as its figures fail to corroborate with research data concurred from other similar analytics.

Jenny Davis-Peccoud, founder and co-leader of Global Sustainability & Responsibility Practice, Bain & Company, stated in an interaction with Fortune India last year that within five years, the ESG practices of Indian enterprises could account for 90% of inbound investments. The potential for attracting foreign investment in ESG has grown from 40% from five years before to the current projection of 90%. The Bain & Co study has also cited that Assets under Management (AUM) within the ESG criteria in India rose by almost 150% from 2020 to 2021.  The total value of ESG AUM in 2021 was $650 million, which is a significant increase from $275 million in 2020.

Global ESG funding has grown by leaps and bounds in recent years, from $6 billion in 2016 to $322 billion in 2021. The figures, extrapolated by London-based Acuity Knowledge Partners, denote the amount to comprise 12% of the total worldwide lending. Davis-Peccoud pointed out that multinational engagement in India has emerged as the biggest factor for the boost in ESG spending.

It is a good sign that the Indian market is gearing up for increased ESG spending. The Infosys ESG Radar 2022 report estimated that for every 10% hike in ESG spending, the profits grow by 1%.  However, in the absence of definite guidelines from the RBI, the market conditions remain unenforceable. Demand the RBI governor to fast-track the process and set up a clear blueprint for greater ESG implementation across all verticals.

PETITION LETTER:

Dear Governor Das,

A recent survey by the Indian Bank’s Association on behalf of the RBI paints a grim picture of ESG investment in India. The survey cites that a lack of clarity in mid-sized to small domestic lenders may be obstructing the flow of ESG capital in the country.  The said survey fails to cite any data in support of its claims.

The premises of the above survey can be misleading as it does not corroborate with similar analytics from other industry bodies. Research conducted by the Global Sustainability & Responsibility Practice, Bain & Company, notes that AUM under ESG funding for the Indian market has grown by almost 150% within one year. The total value of AUM allotted for ESG management in India in 2021 was $650 million, compared to $275 million in 2020.

Online reports indicate that the RBI is likely to set up guidelines for ESG lending somewhere later this year. However, more needs to be done, and we demand the central bank issue enforceable guidelines on ESG spending at the earliest.

Sincerely,

[Your Name Here]

Photo Credit: Markus Winkler


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