Tapping Into Ancient Mercantilism: Corporate Social Responsibility and Sustainable Investing in India By Reynard Loki

By Reynard Loki

“There is little interest in sustainable investment in India’s rapidly growing mutual fund and life insurance market at the current time.” — International Finance Corporation[1]

The Bombay Stock Exchange is the 8th largest in the world, with an equity market capitalization of USD 1.63 trillion as of December 2010[2]. But less than a thousandth of that — about USD 1 billion — represents “total stock of investment in Indian equities where the investment strategy includes a strong focus on environmental, social and governance (ESG) considerations,” according to the 2009 report “Sustainable Investment in India,” which was prepared for the International Finance Corporation (a member of the World Bank Group) by The Energy and Resources Institute, Europe (TERI-Europe).[3] That investment comes almost entirely from foreign insitutional investors (FIIs).


“India has limited domestic sustainable investment market or infrastructure in the listed equity space…There is little interest in sustainable investment in India’s rapidly growing mutual fund and life insurance market at the current time,” the report states, noting that the 2007 version of the report “concluded that India was relatively unprepared for foreign sustainable investment and that this should be seen as a strategic risk to the country’s global competitiveness and sustainable development.”[4]

It appears that among Indian businesses, there is a widespread lack of action in the realm of corporate social responsibility (CSR). A recent survey conducted by KPMG of India’s top 100 publicly listed companies found that less than a third of them file CSR reports and just 16 percent have a CSR strategy. The few Indian firms that do report on their CSR activities include Infosys, Grasim Industries, Oil and Natural Gas Corp., Reliance Industries, Tata Chemicals and Tata Power. Companies in the constuction, energy, information technology and metals and minerals sectors were more inclined to report on their CSR activities.[5]

For India’s small- and medium-sized enterprises (SMEs), it has also proven difficult to engage in an ESG philosophy that would attract socially responsible investors, due to such factors as lack of time or resources to be able to identify, exploit and maintain sustainable opportunities.


In a recent article in The Hindu, Rajalakshmi Sivam notes that the Indian benchmark stock index Sensex has experienced a 16 percent YTD plunge (worse than their emerging market peers like China, South Korea and Taiwan), noting that “foreign institutional investors have pulled out Rs 8,067 crore till date from Indian stocks, after pumping in Rs 61,700 crore in 2010. There could be many reasons for this: One, global debt worries may be prompting them to move funds to safe havens such as treasuries, money market funds and gold. Two, they are re-shuffling their portfolio within the emerging markets as they find Indian equities pricey.”[6] It certainly can’t help that CSR hasn’t yet played a major role among Indian firms, a fact that suggests a correlation with the nation’s extremely low SRI figures.

For its part, the Indian government has been trying to make a shift. Last month, the Ministry of Corporate Affairs (MCA) released the document “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business,” making it mandatory for firms to report CSR activities to stakeholders and also proposing that companies voluntarily dedicate 2 percent of their after-tax profits to CSR initiatives.[7] These moves may help shake the SRI tree. Plus, the Indian consumer is likely to greet such changes with open arms. A recent survey of over 2,000 adults from major Indian cities has found that a majority of them prefer brands with strong CSR credentials.[8]


Attracting domestic or foreign SRI investors by enacting CSR policies throughout India’s companies seems like a no-brainer. But the idea that the private sector can and should be a force of social good is not a new one, and certainly not in India. As MCA Union Minister of Corporate Affairs Murli Deora notes in his introduction to India Inc.’s new ESG guidelines, “From around 600 BC, the merchant was considered an asset to society and was treated with respect and civility as is recorded in the Mahabharata and the Arthashastra.”[9] His point is well taken. As India’s executives pore over the new CSR guidelines with a look to their companies’ futures, they would do well to also take a look at their country’s rich and storied past.



[1] http://www.terieurope.org/docs/indiainvest.pdf
[2] http://www.world-exchanges.org/statistics/ytd-monthly
[3] Ibid., 1.
[4] Ibid.
[5] http://www.livemint.com/2011/08/08230458/Most-Indian-listed-firms-not-e.html?atype=tp
[6] http://www.thehindubusinessline.com/markets/stock-markets/article2333829.ece?homepage=true
[7] http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf
[8] http://www.warc.com/LatestNews/News/CSR_gains_ground_in_India.news?ID=28640
[9] Ibid., 7. The Mahabharata is a major Sanskrit epic that tells the story of the Kurukshetra War. The Arthashastra is an ancient Indian treatise on statecraft, economic policy and military strategy.

image: An 18th- or 19th-century Indian carpet depicting Hindu god Krishna and Indian epic warrior Arjuna on the chariot as described in the Mahabharata, Simthsonian Freer Sackler Gallery. (Wikimedia Commons)


Reynard Loki: Reynard is a Justmeans staff writer for Sustainable Finance and Corporate Social Responsibility. A former media executive with 15 years experience in the private and non-profit sectors, Reynard is the co-founder of MomenTech, a New York-based experimental production studio that explores transnational progressivism, neo-nomadism, post-humanism and futurism. He is also author of the blog 13.7 Billion Years, covering cosmology, biodiversity, animal welfare, conservation and ethical consumption. He is currently developing the Undergound Desert Living Unit (UDLU), a climate change adaptation habitat, and is the co-curator of “Data Deluge,” an international group exhibition featuring artists and designers who use digital data, open through July 2012 at Ballroom Marfa in Marfa, Texas. Reynard is also a contributing author of “Biomes and Ecosystems,” a comprehensive reference encyclopedia of the Earth’s key biological and geographic classifications, to be published by Salem Press in 2013.

( Article published under 3BL Media-INDIACSR partnership)



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