HCL tops among NSE 100 companies in best environment, social & governance policies

HCL Technologies emerged the best firm among India's top NSE 100 companies for its integration of environmental, social and governance policies in an Edelweiss study that analyses business practices under the three parameters.

The Edelweiss ESG Scorecard & Ratings assessed companies across 15 sectors on 40 critical ESG data points and their time series. The weights are equally divided across E, S & G (broadly 33.3 per cent each) and companies are given scores from 0 to 100, with 100 being the highest.

The tech major received the highest overall score of 91.9 out of 100 in the framework.

Also read: HCL Tech shifts workload to other geographies to tackle COVID challenges in India

"At HCL, we consciously work toward integrating ESG programmes into our strategies and company goals to deliver value to our clients, employees, investors and the communities in which we live and work," said HCL Technologies president and CEO C Vijayakumar.

Likewise, the IT/ITES sector scored the highest with an average score of ~90 (out of 100), with scores ranging between 86 and 92. "Their score reflects high scores across all important ESG areas, with particularly high scores on governance," the report noted.

Furthermore, company-wise too, the top four are all IT companies. HCL, TCS, Tech M, Wipro, Bajaj Finance, Infosys, ICICI Lombard, InfoEdge and then the HDFC twins are the top 10 best firms under these parameters, according to the report.

Also read: COVID-19: HCL providing support to over 500 hospital beds in Delhi-NCR

Banking and financial services industry (BFSI) and consumer sectors emerged as the second and third best after IT with scores of 82 and 78, respectively.

Metals & mining, cement and oil & gas sectors made up the rear in the rankings with scores of 63, 68 and 70, respectively. The low ranks were especially due to low scores of 14-17 (out of 33) in the environment parameter.  

"While we note a high level of disclosures on ESG aspects in company filings and strong ESG initiatives, the inherent environment-damaging nature of these sectors outweighs the positives, making them laggards in our framework," the report said.

Three of our bottom five ESG scorers are metals & mining companies (Vedanta, NMDC, Coal India). ONGC, UPL and DLF also lie within the bottom 10. Though pharma as a sector lies in the lower-than-average category, a couple of companies (Aurobindo, Sun Pharma) fall in the bottom 10.

The 10 firms at the bottom of the rankings are UBL, USL, Aurobindo, Sun Pharma, DLF, ONGC, UPL, Coal India, NMDC and Vedanta (with a score of 51).

The Edelweiss report noted that it's the environment parameter that is the biggest drag on the Indian firms analysed, but this is likely to shift up. Indian companies do very well in the social parameter and the pandemic should only raise the game, while divergence is the greatest and subjectivity the highest under governance, it added.

The environment metric covered the nature of core business, impact of business on environmental emissions, waste disposals and effluents discharge. The social metric covered the impact of the company's product, service on society, employee relationship, diversity and equality. The governance metric covered the track record toward minority shareholders, capital allocation track record, board related metrics, and business and accounting disclosures quality. ESG factors that influence long-term perceptions and valuations have higher weights in the Edelweiss framework.

Also read: A Helping Hand