GURUGRAM (India CSR): ICRA ESG Ratings’ latest report titled, Retail NBFCs – Beginning the shift towards a sustainable future, underscores the significant strides top retail Non-Banking Financial Companies (NBFCs) in India are taking in integrating Environmental, Social, and Governance (ESG) principles in their operations, which includes actions towards reducing their environmental footprints and deepening social impacts.
Progress in Environmental Indicators
According to ICRA ESG’s analysis, as per the latest BRSR disclosure, favourable progress has been noted among the top 10 retail-NBFCs by market capitalisation , across key environmental indicators like GHG emissions and energy usage, with an average decline in absolute values by 19% and 7%, respectively, over a three-year period ending FY2024.
Industry Efforts and ESG Commitments
Highlighting the initiatives taken by the sector, Sheetal Sharad, Chief Ratings Officer, ICRA ESG Ratings Limited said, “It is encouraging to see that players are integrating ESG principles into their operations. The reduction in GHG emissions has happened even as the operational footprint of the sample set is expanding, with branches rising by ~13% from FY2022 to FY2024 for the sample set across the country. We have observed that the pace of renewable energy adoption remains slow.
However, half of the entities in our sample set have achieved 100% waste recycling across the reported material waste categories.” The report shows that declaration of ESG commitments has been on the rise, with 60% of the sample set having defined their sustainability targets. Notable green initiatives include reduction of paper consumption and installation of rooftop solar plants, as well as alignment with international standards like UN Global Compact Network and Science Based Targets initiative (SBTi).
Alignment with UN Sustainable Development Goals (SDGs)
The sector has been increasingly aligning with the United Nations Sustainable Development Goals (UN SDGs). Majority of the players are already aligned with 70% of the goals, signaling their commitment towards sustainability. The report emphasises the external social impact achieved by the sample set, particularly in rural areas and towards community development. In FY2024, wages paid in rural areas increased from 28% to 31% on a YoY basis, while community spending through Corporate Social Responsibility (CSR) grew by ~24%, with a budget utilisation of 97%. The average CSR spend rose to Rs. 50 crore, mainly focusing on healthcare, education, and skill development.
The report notes that gender diversity has remained an area for improvement with female participation remaining stagnant at around 12% of the workforce over the last four years. Female representation on boards, however, has increased slightly from 13.6% in FY2022 to 14.2% in FY2024.
Future Outlook for the NBFC Sector
Adds Sharad, “Growing spends in CSR initiatives aligned with UN SDGs, demonstrate the sector’s commitment to sustainability and community upliftment. These efforts not only enhance value for stakeholders but also contribute to India’s broader climate and development goals. We look forward to continued transition and innovation in this critical sector as the awareness in this space grows further. While the actions of the top NBFCs are headed in the right direction, continued efforts are required to keep the momentum going and ensuring that weak areas are addressed as well.”
(India CSR)
