Indian Investors Prioritise Sustainability Amid Challenges With Trustworthy Data: Deloitte

The report indicates that about 78 per cent of Indian institutional investors allocate up to 30 per cent of their funds to organisations with specific, measurable ESG objectives

Over 90 per cent of Indian institutional investors now view sustainability information as crucial in their due diligence processes, according to a study by Deloitte and The Fletcher School at Tufts University. Despite this growing focus on sustainability, trust in the ESG data used for investment decisions must be improved, with challenges in accessing reliable data.

"According to Indian investors, the inconsistency or incomparability of ESG rating data (73 per cent), cost constraints on integrating ESG data into investment decision models (71 per cent) and lack of measurable outcomes in corporate disclosures (70 per cent) reduce the trust factor of available sustainability data, inhibiting their ability to implement ESG investment strategies," Deloitte Highlighted citing its study 'Investor trust in sustainability data'.

The study further notes that Indian investors tend to place more trust in in-house proprietary data systems and audited corporate disclosures for sustainability analysis. In contrast, they are less inclined than their global counterparts to rely on external data sources and ratings.

Viral Thakker, Partner and Sustainability & Climate Leader, Deloitte South Asia, said, "While the focus on sustainable investing is commendable, the lack of access to trustworthy data remains a significant hurdle for Indian investors. There is a critical need for improved reporting standards to build investor confidence and facilitate informed decision-making.”

"Organisations must strengthen sustainable governance capabilities, invest in high-quality measurement and reporting systems, and seek third-party assurance for their disclosures. By prioritising transparency and engagement, companies can align with investor expectations and contribute to social and environmental outcomes, fostering a sustainable future for all,” he added.

The report indicates that about 78 per cent of Indian institutional investors allocate up to 30 per cent of their funds to organisations with specific, measurable ESG objectives. Meanwhile, about 1 per cent invest more than 60 per cent of their funds in such organisations. Regulatory requirements are cited by 41 per cent of Indian investors as the main driver for integrating sustainability factors into investment decisions, followed closely by the desire for improved social and environmental outcomes (36 per cent). This contrasts with global benchmarks, where financial performance and risk diversification are prioritised.

The growing awareness of climate change, social issues, and corporate governance standards has increased pressure on investors from their clients. Approximately 40 per cent of investors feel some pressure, with 15 per cent experiencing significant pressure to incorporate ESG strategies due to client and asset manager demands. This external pressure highlights the influence of client expectations on integrating ESG factors into investment strategies.

"Building and maintaining trust with investors is vital for corporations to stay competitive, grow market value, and gain access to capital. Trust can be built through actions that demonstrate a high degree of competence and positive intent. Our study highlights a significant gap in ESG data reliability, challenging investors who seek to incorporate sustainability into their decisions,” it said.

Shabana Hakim, Executive Director at Deloitte India, stressed, "To bridge this gap and foster greater trust, organisations must reliably deliver on their sustainability commitments and enhance transparency through standardised reporting and robust data verification. By doing so, we can empower Indian investors to make more informed and impactful sustainability investments, ultimately driving positive social and environmental change.”

The survey also shows about 80 per cent of Indian investors have implemented sustainability policies. Among these, 14 per cent have maintained a policy for over five years, while 58 per cent have had a policy in place for more than two years.