Climate Change Impact on India and World – International Reports, Key Observations, etc.

India Inc must follow global example, take affirmative action on climate change

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Making businesses recognise their carbon footprint

The article explains the global trend in investors and lendors are demanding companies to recognise their impact on environment and act on it.

Accountability on climate change: global trend

  • There is a wave of investors pushing large corporations from across sectors, to recognise their carbon footprint and take affirmative action.
  • Aviva, the British insurance company announced it would divest stock and bond holdings in 30 of the biggest corporate emitters of carbon, if their boards failed to take affirmative action over climate change.
  • MPs in the United Kingdom called on the Bank of England to ratchet up environment standards in its pandemic stabilising, corporate bond programme.
  • Swedbank AB, Sweden’s biggest mortgage bank, has taken a decision not to provide fresh loans to new oil and gas projects.

Companies realising social and environmental impacts

  • Several large and growing companies, especially in Europe, are realising their social and environmental impacts and making it a boardroom agenda even without investor guns on their heads.
  • Schneider Electric, the energy management and automation company, has embedded environmental, social and governance (ESG) considerations into every facet of its activities.
  •  The company climbed from 29th to number 1 rank in the 2021 Global 100 ranking in the Corporate Knights index of the world’s most sustainable companies.
  • Only one company from India, Tech Mahindra, has made it to the world’s 100 most sustainable list.

Indian scenario

  • Indian institutional lenders and investors are simply not demanding enough on sustainability.
  • A majority of Indian companies are only meeting compliance norms set out by various state or city authorities.
  • Rarely do they go beyond rule-based compliances and implement environment, social and governance or ESG goals with purpose and passion like their European counterparts.

Way forward

  • SEBI is putting the final touches on the Business Responsibility and Environment Reporting (BRSR) guidelines.
  • The new ESG reporting norm will apply to the top 1,000 listed companies on Indian exchanges.
  • Under BRSR reporting guidelines, companies will have to declare their R&D spends on improving environmental and social outcomes. 
  • They will have to disclose energy and water consumed to turnover ratios, and the percentage of recycled or reused input materials, among many other social and governance disclosures such as CSR, employee skilling and gender diversity.
  • It’s time for lending institutions and investors to align with SEBI and use their muscle to drive a deeper change.

Consider the question “Indian institutional lenders and investors are  not demanding enough on sustainability from the companies. Rarely do they go beyond rule-based compliances and implement environment, social and governance or ESG goals with purpose and passion like their European counterparts. In light of this, suggest the measures to nudge the businesseses to act on their environmental responsibilities.” 

Conclusion

Stepping up green standards to meet Paris Climate Agreement goals cannot be the government’s responsibility alone. Businesses must be part of the movement, or the target of containing global warming to less than 1.5 degrees of pre-industrial levels, will remain elusive.

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