Accelerating The ESG Revolution
The post-pandemic investment landscape is set to place greater value on environment, social and governance (ESG) disclosures. India has struck several new agreements with EU & key European countries which explicitly focus on clean energy and sustainable finance. Impact & ESG investing has grown significantly over the last few years. It is a key component in almost all due diligences by PE investors as well. With the ongoing climate change disaster, investors are preferring organizations that strive to make the world a better place by addressing climate change calamities, and environmental and social issues. It has been noted that companies with strong ESG track records had lower instability rate as compared to their non-ESG counterparts during the big shift in market caused by the COVID-19 pandemic.
According to EY’s 2021 private equity survey, “almost half of the investors said they expect to expand their investments in private equity and venture capital funds that focus on ESG over the next two to three years.” In addition, companies are creating internal policies that link values and commitment to ESG. The year 2021 turned out to be a record year for ESG as an estimated $120 billion dispensed into sustainable investments, which is more than double the $51 billion of 2020.
The COVID-19 pandemic has fast-tracked the transition to a more comprehensive capitalism. In the last couple of years, social issues have become a priority for companies, for example worker safety policies, racial diversity, and others. In India, ESG investing is slowly gaining momentum; it has been reported that inflows in ESG mutual fund schemes in the country have increased by 76 percent in 2021.