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India is at the Bottom of ESG Investment Ranking: Report

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According to a new report, India has the lowest number of ethical/sustainable/green bonds despite being the sixth-largest economy and the third-largest polluter in the world. A report by Refinitiv, an arm of the LSEG Business group has said that the country has only about 22 ESG funds which are even lower than the marginally smaller country Cayman Islands that has 28 of them. The report has highlighted that Pakistan also has 159 ethical bonds and even smaller Luxembourg is leading the list with as many as 2,135 funds.
However, the report says the country is witnessing early signs of pick-up in demand for ESG funds – which are funds broadly labelled as ESG or environmental, social and governance/sustainable investments/ethical funds across mutual funds and insurance products as four of the past five quarters saw strong demand.

What is ethical investing?

According to Investopedia, Ethical investing refers to the practice of using one’s ethical principles as the primary filter for the selection of securities investing. Ethical investing depends on the investor’s views. Ethical investing gives the individual the power to allocate capital toward companies whose practices and values align with their personal beliefs. Some beliefs are rooted in environmental, religious, or political precepts. Some investors may choose to eliminate specific industries or over-allocate to other sectors that meet the individual’s ethical guidelines.
For example, some ethical investors avoid sin stocks, which are companies that are involved or primarily deal with traditionally unethical or immoral activities, such as gambling, alcohol, or firearms. Choosing an investment based on ethical preferences is not indicative of the investment’s performance.

ESG Portfolio in India

As per the report, of the total ESG investment in the country, pure green bonds account for USD 5.02 billion. This shows a massive growth from just USD 450 million in 2020. The value of investment purely marked as ethical funds are just about USD 2.03 billion in the country as of August 2021, which has been steadily rising from USD 445 million in November 2019 which rose to USD 499 million in August 2020 and USD 1,169 million in November 2020. Of the USD 5 billion, the energy and power industry are the largest borrowers so far this year with USD 3.7 billion.

India’s position with respect to other countries

India is well below many countries and markets as there are only 22 ethical funds in India compared to Belgium (148), Pakistan (159), China (162), Germany (352), USA (612) and even Cayman Islands (28) and Luxembourg leading at 2,135.
While Luxembourg leads the ethical fund issuance with 2,135, Australia is second with 1,006 such issuances, France comes third (844), Ireland (630), US (612), Britain (562).
Malaysia (465), Sweden (440), Switzerland (405) and Germany with 352 issues. The world’s biggest polluter China has issued 162 such funds and even Pakistan has 159 and among 40 countries Refinitiv lists India is at the bottom with just about 22 ethical funds valued at a little over USD 2.02 billion as of August 2021.

Top 10 Finance Deals in the country in 2021

1. JSW Steel’s USD 999.99 million bond issuance
2. Greenko’s Dutch arm’s USD 940 million
3. Adani Green Energy’s USD 750 million
4. JSW Hydro Energy’s USD 707 million
5. Axis Bank-Gujarat International Finance Tech city’s USD 600 million
6. Renew Power USD 585 million in March
7. Shriram Transport Finance’s USD 500 million
8. India Green Power Holdings’ USD 460 million
9. Cliffton raising USD 450 million
10. Ultratech Cement’s USD 398.44 million.