The Momentum for Sustainable Finance


3.1 A Growing Momentum

A range of voluntary and legislative actions have highlighted prominent strands of the sustainability imperative in India, particularly related to financial markets and the banking system. The RBI issued its first circular on banking and sustainable development in 2007, encouraging the adoption of best practices

and greater transparency. Since then, important steps have been taken as outlined below. In addition to various progressive measures, corporate social responsibility (CSR) has been formally introduced through the Companies Act of 2013 with effect from 1 April 2014. All companies, private limited or public limited, with a net worth of INR5 billion (US$81.8 million), a turnover of INR10 billion (US$163.7 million) or a

net profit of INR50 million (US$0.8 million) have to spend at least two per cent of their average net profit of the immediate preceding three financial years on CSR activities. Notably, sustainability-linked funding is an option available to companies.


Sustainability Initiatives in the Financial Sector


3.2 Cross-Cutting Initiatives

Released in July 2011, the National Voluntary Guidelines (NVGs) are the product of an intensive multi-stakeholder collaboration spanning three years. These guidelines are constituted into nine core principles (Figure 10) that address different aspects of business responsibility and 48 core elements that are included alongside the core principles to help guide businesses in adopting and integrating the NVGs into their operations. The NVGs are a step towards creating a framework to ensure responsible investment behaviour. They are designed to be used by all businesses irrespective of size, sector or location.

Nine Core Principles as Articulated by the NVGs



Business Responsibility (BR) reports mandated by SEBI for the top 500 companies is‘comply or explain’ type corporate governance reporting policy. Considering the larger interest of public disclosure relating to steps taken by listed entities from an Environmental, Social and Governance (ESG) perspective, SEBI has mandated the inclusion of BR reports as part of the annual reports for the top 500 listed entities based on market capitalization at Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) as of 31 March 2012. The BR reporting format follows the lines of the nine principles articulated by the NVGs (given in the table below): companies have to reply with “yes” or “no” to each question mapped against compliance with the NVGs and explain in the case of a no. Other listed entities may voluntarily disclose BR Reports as part of their annual reports.

The Indian Institute of Corporate Affairs together with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) published an analysis of the corporate reporting in 2014, which states that “the first cycle of reporting would have been a learning curve for first-time reporters and is expected to have established internal processes for data collation”.28 The quality of reporting is expected to improve over time as companies begin to put in place new systems to report and gather data more systematically.

The report also mentions that “the indicator-based structure followed by other sustainability reporting frameworks leaves much to the interpretation of companies and requires a comprehensive understanding of each indicator to identify the data-owner”.


Finally, the working group of Indian Banking Association (IBA) finalized the National Voluntary Guidelines for Responsible Financing in 2015: these are financial sector-specific guidelines that combine and adapt international and national best practices. They contain eight principles:

1. Ethical conduct and Environmental and Social (E&S) Governance

2. Integration of E&S risk management in business activities

3. Minimizing environmental footprint in internal operations

4. Environmentally friendly products, services and investment

5. Enabling inclusive human and social development

6. Stakeholder engagement

7. Commitment to human rights

8. Disclosure


Report by UNEP Inquiry and FICCI



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