ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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ESG Disclosure Strategies in the Indian Capital Markets

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In a pioneering shift and in line with a broader growth and risk management strategy, domestic and international institutional investors are placing substantial portfolio focus on corporations with a positive track record of performance on environmental, social, and governance (“ESG”) parameters. Seeking to enjoy the upsides of long-term value resulting from factors including greater social licensing and reduced regulatory intervention, ESG-focused funds manage over $35 trillion in assets and whose total assets under management (AUM) stand to rise to 33% of the global AUM by 2025. In response to such a fundamental change in investment culture and to facilitate positive ESG behaviour, traditional legal structures have been challenged and compelled to evolve. This is evidenced by the emergence of enhanced disclosure benchmarks and consumer litigation discourses in the European Union and the proposed ESG Disclosure Simplification Act, 2021 in the United States.

As compared to the Global North’s relatively coherent ESG governance models, India’s model suffers from misplaced priorities and an ineffective enforcement and liability strategy. The top 1,000 Indian listed companies by market capitalisation are required to disseminate voluntary annual disclosures of their performance on a common set of ESG parameters prescribed by the Securities and Exchange Board of India (SEBI). This obligation extends to listed companies only irrespective of their sector or scale of operation. The primary punitive consequence, once such reporting requirements are made mandatory, is the imposition of monetary fines. In line with the current Indian economic outlook of facilitating stakeholder value through socially responsible business, it is critical to design an effective legal structure for facilitating positive ESG behaviour.

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Updated On : 4th Jun, 2022
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