Indian Investors Struggle To Get Good Sustainability Data: Study Discussing the findings of the report, Naman Jhawar, Partner and Head of India and Southeast Asia, Picus Capital said that there is a major problem with confidence in available ESG information.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Over 90 per cent of Indian institutional investors now consider sustainability information essential in their due diligence process, a study titled "Investor trust in sustainability data" from Deloitte and The Fletcher School at Tufts University said.
According to the report, sustainability becomes more integral to investment management, trust in the ESG data used to inform these decisions is lacking, posing challenges in accessing trustworthy data.
According to Indian investors, the inconsistency or incomparability of ESG rating data (73 per cent), cost constraints on integrating ESG data into investment decision models (71 per cent) and lack of measurable outcomes in corporate disclosures (70 percent) reduce the trust factor of available sustainability data, inhibiting their ability to implement ESG investment strategies.
Discussing the findings of the report, Naman Jhawar, Partner and Head of India and Southeast Asia, Picus Capital said that there is a major problem with confidence in available ESG information.
"We see three main drivers for this trust deficit. First, majority of Indian investors mention that inconsistency and incomparability of ESG rating data create a bewildering landscape. Without standard metrics, it becomes difficult to judge on apples-to-apples comparisons and, thus, judgment regarding investment opportunities," Jhawar added.
Secondly he said that the cost constraints of making the data on ESG actionable in an investment model were highlighted by many investors. This underlines the importance of accessible solutions that would be affordable to implement especially for small firms.
Third, he said, "majority of them argue that corporate disclosures are lacking in measurable outcomes on initiatives, and the lack of these outcomes is a factor in affecting the trust of these sustainability initiatives. Companies and the investment community need to take further steps to close this gap. Companies have to place more emphasis on transparent and verifiable reporting, while the investment community has to push for standardized ESG frameworks. These data challenges must be met if sustainable investing is to be encouraged to create value and drive positive change."
The study also highlights that Indian investors are more likely to trust in-house proprietary data systems and audited corporate disclosures for sustainability analysis. However, as compared with global investors, Indian investors are less likely to rely on external data sources and ratings.
Viral Thakker, Partner and Sustainability & Climate Leader, Deloitte South Asia, said, "While the focus on sustainable investing is commendable, the lack of access to trustworthy data remains a significant hurdle for Indian investors. There is a critical need for improved reporting standards to build investor confidence and facilitate informed decision-making. Organisations must strengthen sustainable governance capabilities, invest in high-quality measurement and reporting systems, and seek thirdparty assurance for their disclosures. By prioritising transparency and engagement, companies can align with investor expectations and contribute to social and environmental outcomes, fostering a sustainable future for all."
Highlighting the growing trend of sustainable investing, the report states that about 78 per cent of Indian institutional investors invest up to 30 per cent of their funds to finance organisations that aim to achieve specific and measurable ESG objectives. About 1 per cent invest more than 60 per cent of their funds in organisations that meet definitive ESG objectives.
About 41 per cent of Indian investors cite regulatory requirements as the top driver for incorporating sustainability factors into investment decisions, closely followed by the pursuit of improved social and environmental outcomes (36 percent each). This contrasts with global benchmarks, where investors prioritise financial performance and risk diversification.
Shubham Jhuria, CFO & Partner, Aeravti Ventures said that for trust to exist, there is a need for significant data. Based on which, trends and patterns can be identified and exceptional cases can be isolated.
As per India's current landscape, there is a blind rush to increase sustainability ratings without setting the right base infrastructure for benchmarking.
"The awareness, availability, and adoption of emission tracking solutions needs to improve significantly for the collective data to be useful for ESG Ratings and sustainability tracking. Investors, including us, have deployed in ventures which can reasonably help to track your emissions and thereby provide relevant mitigative insights," he added.
