Why Indian investors struggle to access reliable sustainability data

Indian investors struggle more than their global counterparts to access reliable sustainability data and often rely less on external sources and ratings, a Deloitte-The Fletcher School at Tufts University study found.

Instead, they tend to trust in-house proprietary data systems and audited corporate disclosures for sustainability analysis, according to the report.

The inconsistency or incomparability of environmental, social, and governance (ESG) rating data, cost constraints on integrating ESG data into investment decision models and lack of measurable outcomes in corporate disclosures reduce the trust factor of available sustainability data, the study found.

This trend shows that while regulations and standards are emerging both nationally and globally to drive data consistency, they are not yet implemented broadly enough to provide fully reliable data to investors, the study said, while pointing out that investors are most likely to use the information, data, and sources they trust, such as in-house proprietary data systems and audited corporate disclosures, as they prioritize credible ESG disclosures to accurately gauge risk and avoid greenwashing.

The findings in the study are significant as about 80% of Indian investors have sustainability policies in place, and more than 90% are seeking sustainability information as part of their due diligence process.

Deloitte and The Fletcher School surveyed more than 1,000 institutional investors globally, including 78 from India, from January to December 2023 as part of the study.

“Regulatory requirements and improved social and environmental outcomes are among the top benefits Indian investors expect when incorporating sustainability factors into investment decisions,” Viral Thakkar, partner and lead for sustainability and climate for South Asia at Deloitte, said in the report.

Although India’s sustainability investment preferences closely align with global benchmarks, global investors focus more on improved financial performance and risk diversification than Indian investors do, Thakkar added.

Meanwhile, India places more emphasis on improved outcomes, likely influenced by the Corporate Social Responsibility (CSR) Act of 2014, which serves as a model for businesses to enhance the ecosystems in which they operate. This demonstrates a well-rounded approach by Indian investors, balancing various sustainability factors with international trends, the report said.

About 78% of institutional investors allocate up to 30% of their funds to finance organizations aiming to achieve specific and measurable ESG objectives. Meanwhile, about 1% invest more than 60% of their funds in organizations that meet definitive ESG objectives. This trend is expected to grow due to increasing regulations and heightened awareness of climate change issues, the report added.