Dr Zafar Khan COO Highway Concessions One Vicky Pagare Assistant General Manager-HSES, Highway Concessions One “There have been many noteworthy sustainability initiatives that Indian corporate leaders have undertaken. Such initiatives range from change or modification in operations for reducing carbon emissions; to adopting ESG norms in investment and decision-making processes.” — Dr Zafar Khan Environmental, Social and Governance (ESG) investing has developed quickly over the last 10 years, and the measure of expertly overseen portfolios that have coordinated key components of ESG appraisals surpasses $17.5 trillion worldwide, by some measures. Major investment stalwarts in current times are focusing on this aspect with equal importance. In the recent past, we have seen many cases wherein investors have incurred losses in their investments in various assets, due to reasons relevant to asset damages led by environmental calamities, employee loss, legal non-compliances and greater attrition rate. Such risk factors were not captured or focused upon specifically in the past while planning. In today’s world, investing is no longer just about returns. Investors also want their money to fund companies that are committed to contributing to making the world ‘Sustainable.’ ESG has come into the limelight recently to factor in both the elements mentioned above which comprise risk mitigation as well as a commitment toward a sustainable world. The increased investor interest in ESG variables is a reflection of the idea that these factors, together with risks and opportunities, can affect an issuer's long-term performance and should be appropriately taken into account when making investment decisions. ESG investing is a strategy that aims to combine environmental, social, and governance concerns into asset allocation and risk decisions in order to produce sustainable, long-term financial returns. Definitions for how ESG risks are considered might vary. Why ESG In recent years, there has been a growing support for the long-term impact of companies and their operations on society. The effects of the pandemic and climate change have greatly furthered ESG as an initiative for the long haul. Incorporating ESG is not only essential in risk approaches but has now been seen as an emerging factor for financial growth. The spectrum of social and financial investing ESG data provides a metric selection with particular attention given to environmental and social impact metrics. In this case, industries are grouped into broad categories for metrics selection: higher, medium, and lower environmental impact, and higher and lower social impact, while governance metrics are the same for each industry. Current scenario in India ESG investment in India is at a nascent stage of development, though they are evolving fast. The current thrust on climate change and upscaling green energy investments clearly highlights India’s focus on and need for ESG investments. The global commitments made by the country, such as reducing its projected carbon emissions by 1 billion tonne by 2030, meeting 50 per cent of its energy requirement from renewable energy by 2030 and achieving the Net Zero target by 2070 are clear indications of its focus towards integrating ESG factors into the investment process. There have been many noteworthy sustainability initiatives that Indian corporate leaders have undertaken. Such initiatives range from change or modification in operations for reducing carbon emissions; to adopting ESG norms in investment and decision-making processes. With the current focus and well-defined goals, India will surely march ahead rapidly towards increased ESG integrations in its various facets of industrial as well as other departments. Time is running out! As per a recent survey, it has been declared that to keep global warming below 1.5°C this century, we must halve the annual greenhouse gas emissions by 2030 and to avoid a climate catastrophe, greenhouse gas emissions need to fall 45 per cent by 2030 and reach net zero by 2050. This and other factors such as loss of manpower due to inadequate OHS measures, corruption and non-transparent practices within the business; have greatly increased the importance of ESG as a long-term initiative. Incorporating ESG is not only essential in risk approaches but is now being seen as an emerging factor for financial growth. To strengthen ESG measures and integrate them within business operations and systems, it is important to link them with funds, revenues and returns. Hence, the allocation of dedicated funds for ESG is of prime importance in recent times. Also, as mentioned earlier, ESG-related risks can also affect revenue returns, which is the reason why companies carry out thorough ESG due diligence prior to investing funds in any asset. To sum it up, ESG investing helps to get better returns, mitigate risks and most importantly to make this world ‘Sustainable’! Highway Concessions One (HC1) efforts towards ESG HC1 is a KKR backed road platform, and manages seven road assets – five toll roads and two annuity roads, located across seven different states in India. We at HC1 are committed to integrating ESG into our business, thereby making our operations move towards achieving the Sustainable Development Goals set by the Government of India. Below is a quick look at our ESG initiatives and performance – HC1 has also received awards and accolades from government authorities, international bodies, local authorities and media for the tremendous work covering road safety, CSR as well as occupational health and safety. We move upwards and onwards from here; with a main and only focus on making this world sustainable! About the author Dr Zafar Khan, COO, Highway Concessions One, has more than 20 years of experience in heavy civil construction, project management – both in oil and gas and infrastructure as an HSSE expert and management professional. Vicky Pagare, Assistant General Manager-HSES, Highway Concessions One, has more than 13 years of experience working as a HSSE professional and ESG professional in asset management companies. Currently, he is leading ESG Function at Highway Concessions One.