A bad idea: Separating ‘E’ from ESG

Source: The post is based on an article “A bad idea: Separating ‘E’ from ESG” published in The Business Standard on 31^st August 2022.

Syllabus: GS 3 – Industries and industrial policies 

Context: The article discusses the importance of social and governance for any entity and what stand can India take in the future.

What are the importance of social(S) and governance (G) in ESG?

The S and G pillars are as important as E(Environment) in assessing corporate performance from stakeholders’ perspective.

Corporations that violate human rights, infringe labor rights or have gender-insensitive policies should be disapproved and they can’t be idolized.

Impact investments can’t ignore a corporate’s performance under these two pillars.

Even the Conference of Parties’ (COPs’) negotiations under the UNFCCC framework give due consideration to Social and Economic factors, besides Environmental.

What are the issues associated with COPs meetings?

The developing countries have struggled to put up a united front to keep the social and economic dimensions relevant in these discussions.

They have failed to meet their commitments on providing finances and technology transfer to developing countries.

There are clear signs of developed countries sliding back on their own emission commitments made in climate change negotiations.

The ongoing Russia- Ukraine war and its impact on the global availability of fossil fuels and their prices have forced many countries to rework their energy policies.

What are the different stands taken by developed countries?

The developed countries mostly try to push their agenda due to their larger presence in the international forums.

ESG is an important subject of discussion in international forums like Financial Stability Board (FSB). These forums are dominated by the developed countries and their decisions prevail.

What is required from India in the G20 meetings?

Indian officials attending meetings of these forums need to be careful. They should not end up supporting ideas that go beyond what has been agreed during the climate change negotiations.

India will assume the presidency of G20 by the end of this year.

There is likely to be a lot of pressure from the developed member countries on India to commit more on such issues that are of interest for the developed countries.

We must safeguard our domestic policy space in these negotiations.