Budget Should Focus on ESG Issues: Experts

With the government committing to become carbon neutral by 2070, it is imperative that the forthcoming Budget should focus on Environmental, Social and Governance (ESG) issues by providing tax and non-tax incentives needed to promote green economy, say experts. Indian businesses are undergoing significant changes amidst externalities such as climate change, finite resource availability, technology disruptions, emerging linked ecosystems and evolving stakeholder expectations.

According to PwC India, the budget should incorporate ESG parameters when structuring incentives, allocating resources and in the procurement processes, across sectors and institutions. It is also imperative to stimulate a more enabling ecosystem for ESG adoption, by promoting research and innovation. "Additional budgetary allocation, viability based funding and institutional capacity building for cleantech, including carbon capture, utilisation and storage (CCUs), hydrogen, transportation, grid flexibility, afforestation and nature based solutions are critical for creating an enabling ecosystem for ESG adoption," said PwC India.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget for the next fiscal in Parliament on Tuesday. Rishi Raj, COO, Max Estates Ltd, said as a progressive real estate player, his company wants to make a positive contribution to the environment. "Government interventions and policy changes like tax rebates for meeting set environmental standards and certifications, green taxes on harmful environmental activities, and subsidies on use of green products and services like solar panels, electric vehicles and carbon neutral materials can go a long way in furthering the agenda of sustainability, which has steadfastly become the need of the hour," he said.

Pramod Bhasin, Founder, Asha Impact said with the Covid-19 pandemic augmenting the demand for sustainable investing further, it would be good to see initiatives that unlock institutional capital for these investments, which currently lag far behind global allocations. "This could be allowing CSR investments in ESG focused AIFs or development of the Social Stock exchange to promote capital flow towards ESG focused enterprises," he said.

On expectations from the Budget, Vikramjiet Roy, Managing Director of Maccaferri Environmental Solutions Pvt. Ltd (MESPL) in India said it should lead India towards becoming a green economy in line with the government's commitment towards net-zero. "For this, the Government will have to pave the way for creating an enabling atmosphere for corporates to start budgeting towards ESG.

Like in the case of CSR, ESG investments should also be rewarded," Roy said. Jaya Vaidhyanathan, CEO, BCT Digital said that it is crucial that Union Budget 2022-23 pays due consideration to ESG and the implementation of requisite practices, to enable sustainable growth of the country. Pointing out that the government's commitment to become net-zero by 2070 is evident through multiple initiatives like the push towards electric vehicle adoption, Vaidhyanathan said this focus should only become prominent in the budget and in the times to come through steps like incentivising adoption of green technology.

"The rising emphasis of Indian enterprises on ESG and the government's support in the same regard is encouraging, as it will certainly contribute in enhancing holistic brand value to multiple stakeholders and maintaining premium equity valuation," Vaidhyanathan added.

Sambitosh Mohapatra, Partner and Leader - ESG, PwC India said said the pandemic amplified and accelerated responses for some of the biggest challenges in the society, and demonstrated the urgent need for systemic changes in areas like social inclusion, green and equitable growth, the need for reskilling and job creation, along with the broader compliance focused agenda of ESG in India.

It is imperative that businesses leapfrog to the next level of transformation by leveraging ESG and technology lenses and the budget should provide the fiscal nudge needed by Indian businesses to further their commitments in the ESG space, Mohapatra said.

(PTI)