Investor power accelerating development of sustainable green economy: Atul Bagai of UNEP India

Investor power accelerating development of sustainable green economy: Atul Bagai of UNEP India

Atul Bagai, Head, UN Environment Programme, Country Office, India in conversation with Business Today talks about how India's listed companies can help India achieve its commitment.

Atul Bagai, Head, UN Environment Programme, Country Office, India Atul Bagai, Head, UN Environment Programme, Country Office, India

India's commitment at COP26, other than meeting net zero by 2070, also includes the country to reach its non-fossil energy capacity to 500GW, meet 50 per cent of its energy requirements from renewable energy, reduce the carbon intensity of its economy by less than 45 per cent by 2030. It also includes reducing the total projected carbon emissions by 1 billion tonnes from now onwards till 2030. While the UN Environment Programme (UNEP) welcomes and appreciates India's move, it is certainly going to be challenging for a developing country like ours. Atul Bagai, Head, UN Environment Programme, Country Office, India in conversation with Business Today talks about how India's listed companies can help India achieve its commitment.

1. For India to cut down its carbon emissions, what role can India's top listed companies play towards India's commitment to the Paris Agreement?

India has already reduced the emission intensity of GDP by 28% over 2005 levels, against its NDC (Nationally Determined Contributions) commitment of 35% by 2030 to the Paris agreement. In addition, India now has a share of 38.5% in the installed power generation capacity based on renewable energy. Announcements have already been made to further raise the targets to 450 GW of renewable energy capacity by 2030, against the existing target of 175 GW by 2022.

The big industrial giants have a major role to play in contributing to these ambitious targets and reducing not just their own, but overall emission intensity of India. The top listed countries in India are into variety of businesses textiles, telecommunications, retail, natural resources, automobile, paints, cement and petrochemical sectors, services (IT, banking, financial etc), which have significant contributions to carbon emissions either directly or indirectly through the use of electricity. There are various ways these companies can contribute to reduction of carbon intensity in India. Shift to cleaner and more efficient technologies of production can lead to reduced fuel consumption and emissions of GHGs and air pollutant emissions. Shift to renewables for captive power generation is another option which companies can opt to reduce their carbon footprint. In addition, through corporate social responsibility they can provide resources for carrying out research & development, awareness generation, capacity building activities for development of technologies, mechanisms and behaviour change for control of carbon emissions.

2. How are India's biggest corporates contributing towards this commitment?

Many large domestic industries have set science-based climate commitments. As many as 57 Indian companies have committed more than 95 emission reduction targets. Many others have set renewable energy and energy efficiency targets. Indian businesses are also increasingly putting an internal price on carbon to meet their climate targets, according to the CDP India Annual Report 2020.

Various Indian companies are committed to Business Ambition for 1.5°C, which is an urgent call to action from a global coalition of UN agencies, business and industry leaders, in partnership with Race to Zero. This is a global campaign to rally leadership and support from businesses, cities, regions, investors for a healthy, resilient, zero carbon recovery that prevents future threats, creates decent jobs, and unlocks inclusive, sustainable growth. Several have also announced net-zero targets and have started to achieve them in different ways. Some by shifting to renewable energy and focussing on reducing carbon dioxide emissions and recycling water from their own operations. Some are appropriating technology to cut greenhouse gases like methane, and others are trying to ensure their supply chain and consumers are kept in the loop to achieve a circular economy for their products.

Indian companies stand to lose Rs 7.14 lakh crore to the impact of climate change if they do not take mitigation measures over the next five years, according to the Carbon Disclosure Project's (CDP) 2020 annual report. If they, do it right, the firms also stand to gain Rs 2.9 lakh crore from the opportunities that will emerge.

There is an increased recognition of climate change risk to businesses. There are many leading companies/ financial institutions who are integrating climate risks in their risk management strategies.

3. Which according to you of the listed companies in India has managed to achieve over the last few years in comparison to the global enterprises?

As also mentioned above, some of the leading businesses in India have really shown their commitments for climate action. For example, Mahindra Group's work in EV technology, Godrej Group's Greener India initiative and their increasing renewable energy portfolio, India Climate Collaborative launched in 2020 and few of the many initiatives by India businesses in the climate space. ReNew Power promotes increased access to renewable energy and improved energy efficiency. Tata Power in 2019 announced to achieve targets of 70% of power generation through renewable sources by 2025, as per the Company's plan, Strategic Intent 2025. In 2021, Wipro also committed to achieve net-zero greenhouse gas (GHG) emissions by 2040. CII has recognised and awarded 11 companies for their climate action. Various Indian companies have made their place in the Dow Jones Sustainability Index.

4. When it comes to environment what areas are enterprises working on and should focus on?

Indian companies are working on a variety of environmental issues. With enhanced demands of improved fuel efficiency and cleaner technologies, several companies have improved their processes which not only reduce the production-based emissions but also the products manufactured (in some cases) are more environment friendly. Automobile sector has gradually moved from production of significantly polluting vehicles of pre-Euro era before 2000 to significantly cleaner ones (Euro-VI equivalent in 2020). Several of these companies are also now into developing electricity based models, which can reduce the local emissions to zero. In addition to this, automobile fuel efficiency standards have been rolled out for reducing fuel consumption in the sector. On power generation, there are companies which are into delivering cleaner and smarter energy choices and hence contributing to India journey towards reduced carbon footprint. Some industries at the facility level have also been active in reducing their carbon footprints.

Under the Perform Achieve and Trade (PAT) scheme, which is a market-based compliance mechanism to reduce energy consumption in energy intensive industries, industries made an energy savings of 8.67 MTOE (PAT Cycle -I was) and of about 13.28 MTOE (PAT cycle 2) resulting in avoidance of 31 and 61 million tonne of Carbon dioxide emission, respectively. In addition to this, adoption of natural gas, electricity, and cleaner technology (e.g. zig-zag brick kiln) are some of the other examples where industry has been coming forward and making a contribution.

While a good start has been made, there is still lot to be done. Industries still have a major share in both carbon and air pollutant emissions in India. Use of electricity generated through renewable sources is the key and with prices going down over the years, it is becoming more and more feasible. With growing awareness and customer demands for greening, companies should also develop greener products and become front runners to develop markets for green customers. The regime needs to change from just responding to 'command and control' to 'voluntary actions' in order to contribute in improvement of both local and global environment.       

5. Around 24 companies including Tata, Reliance, Adani pledged to be carbon neutral to lower India's greenhouse emissions almost a year ago. Do you see some progress in this space?

This is certainly a pioneering initiative and certainly holds a huge potential as it provides a unique platform for various stakeholders come together along with leading corporate groups to work for a common cause. I think currently it is in its foundational stage but we hope to see much action.

6. Do investors care about the company's work in sustainability space?

The world economic forum, places climate change as one of the top risks to global economy. Various businesses directly dependent on nature and environment for their businesses are going to be directly impacted, for example, agro and food industries, water-based industries, pharmaceuticals, tourism and many other.

So far it is seen that investments in nature-based solutions are considerably smaller than climate finance and much more dependent on public funds. Private finance accounts for most of the climate finance at around 56%.

Environment and sustainability issues has become more serious and prominent. This has led to growing importance of reputation risk and higher voluntary standards. For example, over 400 Indian companies are signatories to the UN Global Compact which is a voluntary commitment by businesses to implement universal sustainability principles. According to the UN Global Compact, nearly 80% of its members say that by joining, they were able to increase trust in the company, which is a key intangible asset.

There are growing number of investors around the world proactively engaging with their investee companies on sustainability issues. Here, investors are not trying to identify and avoid sustainability risks but rather are creating sustainability opportunities. These investors are actively using their investor power to accelerate the development of a sustainable green economy and livelihood. Investing in energy efficiency and renewable generates five times more jobs per $1 million than investments in fossil fuels.

Usually, retail investors, distributors of financial products or financial advisers focus on returns. But now, society wants to associate with businesses that are more responsible towards sustainability. This is already visible in the global lending and investing practices. Companies, despite generating high profits, could lose prominence or importance in the investment horizon if they have low Environmental, social, and governance (ESG) scores and thereby risk losing capital flows.

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