SEBI's new recommendations on ESG and business responsibility disclosures a step in the right direction
The corporate governance committee constituted by SEBI has recommended wide-ranging changes to the way listed firms are governed. This includes separating the office of chairman and managing director, transparency in disclosing reasons of resignation independent director and establishing dedicated group governance units.
“Recommendations of the SEBI committee on corporate governance to include one additional board meeting every year to discuss issues such as ESG (environment social and governance) is a step which will give ESG related issues its due prominence. This recommendation is line with SEBI’s previous progressive action on making business responsibility disclosures mandatory for top 500 listed companies in the form of Business Responsibility Reports (BRR). Having a specific board meeting agenda on ESG will ensure that any ESG risks or gaps emerging from the BRR disclosures will get due attention,” says Nisha Agrawal, CEO, Oxfam India.
While there is substantial awareness and some action of the governance part of ESG there exist major gaps on the environment and social part of ESG. Oxfam India’s upcoming report Drops before the Rain – India Sustainable and Responsible Investing Landscape 2017 highlights that ESG linked investments are rapidly growing globally and stands at approximately $ 22.89 trillion. This report estimates that the size of ESG linked investments in India is close to $30 billion. This report will be launched in Mumbai on November 3.
Civil society led India Responsible Business Index ranks the top 100 companies on their policies and disclosures on social issues based on BRR. Last two editions of this index has highlighted major policy gaps in the areas of community engagement and supply chain of the top BSE listed 100 companies. This recommendation will let corporate boards become aware of such business risks and perform its fiduciary duty to also protect the stake of community and environment.
“The proposed regulation of having an independent women director is a much needed step to force companies to step out of their comfort zone of appointing family members as women director for the sake of compliance,” adds Nisha Agrawal.