Cement, Energy and Environment

ESG factors are set to play a key role in the decision-making process of the Indian equity capital markets. The expanding ESG model in India reflects a strong path driven by regulatory, and corporate governance scrutiny and strategic alignment with global sustainability goals. The ongoing trend, supported by strategic sectors and regulatory frameworks, positions ESG investments as a strong force in moulding India’s financial ecosystem, contributing to a more sustainable and resilient economy for the years ahead. Figure 1 depicts the major components of the three limbs of ESG. In 2020, the World Economic Forum and the International Business Council (IBC) advocated for major global corporations to adopt ESG standards for their 2021 reports, further highlighting the growing importance of ESG planning, the ESG reporting has seen considerable growth with heightened awareness from companies, investors and regulators. Organizations need to make ESG reporting both meaningful and actionable for stakeholders. Adapting ESG practices offers significant advantages including improved financial performance, cost saving, competitive edge through brand loyalty and talent attraction, regulatory compliance and enhanced long-term resilience. ESG also helps address pressing issues such as climate vulnerability, social inequality and governance concerns, making it a key factor for India’s future development and global leadership. For India rapidly developing nation with global leadership inspirations embracing ESG has become vital. With its large and diverse population, India faces social challenges such as poverty, inequality, and lack of basic needs, companies Fig-1 Depicts three limbs of ESG that prioritize social responsibility can drive positive social change, creating a more inclusive economic society. Strong corporate governance, including transparency, ethical conduct, and corruption-free management is essential for a developed economy. Companies with sound governance practices can build trust, attract investments, and foster a stable and long-term sustainable economy. The growing emphasis on ESG principles is reshaping global investment trends very fast. Companies with strong ESG performance are increasingly favoured by investors, leading to higher market valuation and enhanced competitiveness. This shift is particularly relevant considering the European Union Carbon Border Adjustment Mechanism (CBAM), which imposes a 25% tax on energy-intensive goods exported from India to the EU, as highlighted by a report from the Centre for Science and Environment (CSE). The CBAM targeting products like iron, steel, cement, fertilizer, and aluminium is based on carbon emissions generated during their production. Cement export to the EU is limited, and even then Indian cement industry needs to reduce its carbon footprint to the possible extent to compete with the EU cement industry. The EU Carbon tax aims to create a level playing field for European manufacturers who comply with stringent environmental standards. However, it has sparked concern among developing nations having potential to disrupt trade and impact their economies. In 2022- 27