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Tata Group makes compliance to ESG standards top priority


Tata Sons has sent a directive to heads of all group companies to urgently put together a dossier on how each company meets the environment, social and corporate governance (ESG) norms, people familiar with the matter said.

Being ESG compliant is expected to raise the ratings of Tata group investment opportunities globally while potentially lowering its borrowing costs, they said.

This month all individual company bosses are supposed to submit a presentation on the same, they said.

The Covid-19 pandemic and worsening environment situations are pushing decision makers as well as investors across the world to give heavy weightage to ESG, and Indian corporates are now forced to make it part of their compliance structure.

It is also becoming a regulatory requirement.

Market regulator Sebi is seeking greater granularity and accountability in disclosures by listed companies in ESG space.

“A dedicated focus on sustainable energy will help companies access larger pools of capital and thus raise funds in more competitive terms including lower costs,” said Sandeep Bhattacharya, India project manager at Climate Bonds Initiative, a global certifying body. “The government, too, would be bringing some regulations sooner or later amid a general move towards net zero emissions globally.”

Tata Group is pursuing it as top priority, officials said. Group chairman N Chandrasekaran has made it a priority to be woven into the growth targets of each company to bring in more accountability, they said.

“Rising demand by global investors and funds for corporates to be environmentally sustainable has made this move imperative,” a top group official told ET.

Tata Sons did not comment.

Tata Sustainability Group (TSG), a part of Tata Sons, currently serves as the nodal resource on sustainability for group of companies. Tata Sons had in 2019 hired Siddharth Sharma as the group’s chief sustainable officer.

Tata Motors’ electrified products portfolio, including fully electric, plug-in hybrid and mild hybrid vehicles, is a key initiative towards sustainable business, a group official said.

Tata Power is looking at more than 65% non-fossil fuel sources in its generation portfolio by 2025. All other group companies have committed to ESG standards as part of their growth strategy going ahead.

Rising investor demand for corporates to be ESG aligned also impacts fund raising and brand image globally, officials close to development said.

“Many large companies are preparing to be compliant with standards like science-based targets initiative and other global standards,” Bhattacharya of Climate Bonds Initiative said.

Companies are increasingly looking to raise offshore funds via green or ESG-compliant bonds.

The country’s largest cement producer Birla-owned UltraTech recently raised $400 million in its maiden offshore bonds issue that was marked as ‘sustainable’.

Shriram Transport Fin and non-conventional energy companies such as ReNew Power, Greenko and Continuum, too, have tapped the same route this year.

In July last year, Reliance Industries chairman Mukesh Ambani had laid down a plan to turn the company into net zero-carbon by 2035. In February this year, it sourced the world’s first consignment of ‘carbon-neutral oil’ from the US as an exercise to achieve the larger goal.

The move for ESG gathered steam after Joe Biden became the US president in January. He has set a target for the US to be net zero carbon by 2050 while China, the world’s largest emitter, aims to achieve it by 2060.

John Kerry, the US’ special presidential envoy for climate, had recently said the world’s big emitting countries, including China, India, Russia and Japan need to “really step up” and begin to lower greenhouse gas emissions. He called on all nations to raise their ambition to fight against climate change.

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