(EnergyAsia, February 5, Tuesday) — Standard and Poor’s, CRISIL and KLD Research & Analytics, the social and environmental research firm, said they will launch the S&P ESG India Index, the first investable index of companies whose business strategies and performance demonstrate a high level of commitment to meeting environmental, social and governance (ESG) standards.

The index provides investors with an instrument to incorporate sustainability measures into their investment decisions and will provide a model for the launch of similar indices in other emerging markets.
Initiated and sponsored by the World Bank’s International Finance Corporation (IFC), this pioneering Index comprises 50 Indian companies that meet certain ESG criteria and have been drawn from the largest 500 companies listed on the National Stock Exchange of India through a two-stage screening process.

Subir Gokarn, chief economist for Standard & Poor’s Asia Pacific, said: “As the private sector becomes more important in the growth and development of emerging economies, the profit motive needs to be brought into alignment with the public interest. The scope of regulation, though critical, is limited without a commitment by investors to reward strategic behaviour that creates long-term value by balancing the interests of all stakeholders.”

Dr Gokarn has been associated with the project from its inception, including in his earlier capacity as chief economist at CRISIL, India’s leading ratings, research, risk and policy advisory company.

Rachel Kyte, director of IFC’s Environment and Social Development Department, added:
“With growing pressure on investors to seek diversification and returns by entering markets such as India and with more and more investors keen to invest in responsible firms, IFC hopes that the launch of this index will be another important attempt to ensure that good performance is rewarded in the market and that ‘the best in class’ Indian companies can access capital that is aligned with their success.”

Michelle Lapolla, managing director of consulting services at KLD, said: “We have been conducting in-depth, qualitative ESG analysis on companies for 20 years. In this project, we have tailored our approach far more precisely to the Indian context, taking into account disclosure and reporting standards prevalent amongst Indian companies.”

Alka Banerjee, Standard & Poor’s vice president of Index Services, said: “The S&P ESG India Index is unique because it links a company’s ESG score to its index weightings so that companies with higher scores carry higher weightings. While the 50 companies that have been included in the index are largely familiar names, their performance on ESG parameters assures investors that their portfolio is consciously balancing the interests of all stakeholders and, thereby, creating a platform for strong long-term performance.”
IFC launched the ‘Capturing Value’ grant competition, which initiated this project, to provide emerging markets investors with better information on companies’ environmental, social and governmental performances.

The creation of this landmark ESG index is the result of a pioneering collaboration. It draws upon S&P’s expertise in governance metrics and indices, KLD’s experience and reputation on screening companies across all three dimensions using public information, and CRISIL’s strong understanding of the Indian business and regulatory context.

The S&P ESG India Index will be maintained by India Index Services Ltd, a joint venture between CRISIL and the National Stock Exchange of India, which also manages the flagship S&P CNX NIFTY index of India’s largest and most liquid companies.