India is a developing country with low per capita energy use. Even historically, India’s contribution to cumulative global emissions has been only around 4%, despite having a much larger share of the world’s population. But the country is the third largest emitter currently, with considerable energy needs to support its projected demographic transition, urban expansion, and infrastructure development.
In 2021, India’s annual carbon emissions grew by around 11% y-o-y, more than double the global average of 5%. In this scenario, where emissions are expected to peak as late as 2040-2045, a strong pledge to limit the concomitant temperature rise is warranted – particularly given that large parts of the population remain acutely vulnerable to extreme weather events.
A good start has been made with the net-zero-by-2070 commitment, articulation of renewable energy targets, rollout of government initiatives around EVs, green hydrogen and solar modules, and climate focused financial outlays in the national budget. However, as some assessments have indicated, these may still not be enough to align with the Paris Agreement’s 1.5°C temperature limit.
To combat climate change, the country will need to strike a delicate balance between the seemingly competing objectives of higher economic growth and lower carbon pathways. But given the oil-reliant transport sector; the emission-intensive agrarian and industrial ecosystems; and that more than two thirds of power generation is still dependent on fossil fuels; it is going to be difficult to mobilise the public financing required to achieve a timely transition. Some studies estimate the investment deficit could be as high as USD 3.5 trillion for a 2070 net zero scenario.
Corporate India therefore has an outsized responsibility to provide this balance. As cultivators and allocators of private (and global) capital, they have better access to the technology and resources needed to drive change. Moreover, given the large, interconnected networks within which they operate, even incremental measures to ensure conscientious use of fossil fuels can have a multiplier effect across product lifecycles and SME-dominated supply chains.
Where Corporate India Is Falling Short
Unfortunately, while much progress has been made in the past few years, many companies still fall short in delivering on climate action. Our analysis reveals that more than three-quarters of the NIFTY 50 constituents have climate policies in place. However, these tend to be generic and provide limited information around the strategy for mitigation and adaptation. Many choose not to disclose relevant data around their current level of emissions, particularly scope 3. Seven companies have conducted and published a climate scenario analysis — implying that for the rest, external stakeholders have no clarity on the vulnerability of physical assets.
Around 40% of these companies have disclosed a net zero ambition. But only six have received external (SBTi) validation of their decarbonisation pathways. In almost none of the cases is there any visibility on the amount of capex, R&D investments, technological innovation, or the level of government support that will be needed to achieve the transition. Senior executives and board members are rarely incentivised or made accountable for delivering on climate action — only one company in the index has linked executive compensation to environmental metrics.
The urgent need for tangible progress has put the spotlight on investor stewardship. Many global asset managers, including APG, have publicly committed to the goals of the Paris Agreement and aim to steer their portfolios towards net zero emissions by 2050. As a result, and driven further by clients’ sustainability ambitions, risk management prudence, along with a desire to affect change, climate risk considerations are now integrated into investment decisions. For actively managed portfolios, the process is often supplemented by targeted dialogue, voting and, if required, escalation or divestment.
In the Indian context, the rigor of investor scrutiny around corporate sustainability practices has increased over the years. In addition, there is systemic recognition of the unique opportunities presented on account of the country’s stated ambition, pace of growth, and cost leadership in renewable energy installation. From a strategic perspective, this means that environment-friendly projects are no longer good-to-have measures — rather, they play a material role in creating value, attracting capital, and promoting resilience. And that is why investors will continue to focus on the need for enhanced transparency, along with assurance on board oversight and monitoring of environmental initiatives. Over time, this dialogue is expected to frame accountability, paving the way for judicious and more effective implementation of climate action plans.
The author is Senior Manager, Responsible Investment and Governance, APG Asset Management Asia.
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