Each week Emerging Markets ESG publishes an interview entitled, “Five Questions about Socially Responsible Investment (SRI).” The interview features a practitioner’s insights about SRI in emerging markets and through Emerging Markets ESG shares this expertise with a wide global audience. The goals of Five Questions about SRI are fourfold:
- To collect a catalogue of examples of SRI in practice in emerging markets;
- To raise awareness about SRI in emerging markets;
- To reflect on what SRI in emerging markets means to practitioners; and
- To enable SRI practitioners in emerging markets to network with peers around the world.
This week’s interview is with Namita Vikas, President and Chief Sustainability Officer, YES BANK, Mumbai, India.
YES BANK, India’s fourth largest private sector bank, is the outcome of the professional & entrepreneurial commitment of its Founder, Mr. Rana Kapoor, and his top management team, to establish a high quality, customer centric, service driven, private Indian bank catering to the future businesses of India. YES BANK has adopted international best practices, the highest standards of service quality and operational excellence, and offers comprehensive banking and financial solutions to all its valued customers. YES BANK has a knowledge driven approach to banking, and a superior customer experience for its retail, corporate and emerging corporate banking clients. YES BANK is steadily evolving as the Professionals’ Bank of India with the vision of “Building the Best Quality Bank of the World in India” by 2015. Namita Vikas is President and Chief Sustainability Officer at YES BANK. She spearheads YES BANK’s Version 2.0 Vision & Strategy of further strengthening the bank as a commercially viable financial institution with sustainability principles incorporated within its core operations. Namita is also responsible for mainstreaming sustainability via a two-pronged approach of Responsible Banking in Thought and Responsible Banking in Action. Her work involves sustainability research, strategic philanthropy, Triple Bottom-line Accounting, Socially Responsible Investing (SRI) and building innovative models through social enterprises incubation. She nurtures a range of external and internal stakeholder relationships to create innovative, scalable and financially viable approaches to development and public policies for YES Bank. Institutionalizing and formation of “YES Foundation” is one of her immediate critical agenda items. Namita has over 22 years of experience in Corporate Social Responsibility (CSR), public affairs, communications and policy advocacy. She has held leadership positions with Marico Ltd, Microsoft Corporation and the Confederation of Indian Industry. Prior to joining YES BANK, she headed the Marico Innovation Foundation, which she was instrumental in establishing. Namita serves as a Jury on The World Bank’s Development Market Place initiative for India, Tata Group Innovista Awards, and Mariwala Foundation Women Entrepreneurship Awards. She is an Advisory Board member of Responsible Investment Research Association (RIRA) and of the Indian Centre for CSR (ICCSR). Besides, she is a member of National Committees on Sustainability & Innovation of FICCI and ASSOCHAM. Namita has an Advanced Management Degree in CSR and Leadership from the Svenska Institute, Sweden, a Bachelor degree in Economics and Diploma in Business Management from Mumbai University.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Namita Vikas: Environmental and social considerations are increasingly becoming a measure of an organization’s performance. These issues are impacting financial bottom lines, long term brand value, risk profiles, competitiveness and business sustainability. We believe that social and environmental opportunities form an integral part of good business. Socially and environmentally responsible businesses can enhance clients’ competitive advantage and create value for all parties involved. Therefore we define socially responsible investments as those that not only deliver good financial returns but also have a positive social or environmental impact.
We believe that banks as intermediaries of economic growth have to be mindful of their financial commitments and therefore it is extremely important to look at environmental, social and corporate governance (ESG) performance of companies. We look out for those organizations with high negative ESG impact and through a robust scrutiny mechanism, only invest in companies that demonstrate high standards of ESG performance.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Namita Vikas: Mainstream investments look at only financial risks and returns, whereas SRI goes beyond this into environmental and social risks and opportunities. It assesses the risk involving the entire gamut of stakeholders in the value chain and a business’s impact on these stakeholders. SRI would therefore be a lens that helps mitigate long term risks and identify long term opportunities which is holistic in nature thus creating shared value.
In addition SRI serves as a relatively thorough process of due diligence, that lowers the overall investment risk considerably.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for companies in India to manage?
Namita Vikas: What gets mandated gets done. In India there is a statutory requirement on financial reporting, therefore governance is prioritized among non-financial reporting. However particularly on account of India’s rapid industrialization, natural resources are under considerable strain. Indian industry faces challenges in finding sustainable sources for raw materials. Due to prevalent instances of environmental damage owing to industrial activity, the Government of India has tightened rules on enforcing sustainable sourcing of raw materials.
There is also increasing pressure on Indian manufacturing to adopt the latest and most efficient techniques and processes for waste, emissions and effluent management. While some large Indian companies are on the forefront of managing their environmental impacts, a large section of India’s emerging enterprises still grapple with process of adopting these practices. Hence, environmental issues are more challenging for companies in India to manage.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in Indian companies to analyze?
Namita Vikas: The environmental and social themes are both equally challenging for the analysts in India. From our observations during the last five to six years, we can deduce with some degree of confidence that many financial organizations have focused on developing frameworks around measuring corporate governance standards of investee companies. The E&S themes may have lagged behind due to a lack of availability of high quality and consistent data for further analysis. However, this scenario could be changing soon as the Ministry of Corporate Affairs and other regulators in India play the lead role in drafting guides and policies on E&S issues and risks.
These ministries are now laying out the rules and frameworks for organizations to adhere to, which give investors a fairly encompassing dataset to deal with extra financial aspects of investing. However, I feel that Indian investors currently lack the resources or guidance to fully analyze the social risks and impacts of business. I think this is because of an inability to monetize social impact unlike environment or governance factors.
Therefore I personally believe that the social risks and impacts can be made a part of mainstream investments if there is a further proactive push by the Government and the regulating bodies along with sensitizing the banking sector on the same.
Emerging Markets ESG: What does sustainability mean in the context of Indian private banking? Could you please provide one example of how YES BANK is mainstreaming sustainability through Responsible Banking in Thought and one example of Responsible Banking in Action?
Namita Vikas: Sustainability in Indian private banking is still in its nascent phases with very few pioneering organizations such as YES BANK actively adopting it. The industry is being introduced to ESG parameters driven by initiatives by like-minded players and guidance from the Reserve Bank of India and the Government of India.
At YES BANK, we have established an Environment and Social Policy (ESP) which positions the Bank to adequately meet, respond to and enhance current benchmarks in environmental and social risk management. This complements the Bank’s already robust Credit Risk policy.
YES BANK mainstreams environmental and social issues strategically as an integral dimension of business through the ESP, creating a checklist of allowable activities and guidelines for identifying environmental issues. More specifically, these issues are dovetailed with issues of governance, policy, incentives and risk management. This policy enables us to develop processes to recognize, evaluate, and to the highest degree possible, monitor the environmental and social facets of banking operations and stakeholders.
At YES BANK, socially responsible equity investment programme evolved from the Bank’s extensive experience as lender and advisor to sustainability-focused Small and Growth Enterprises (SGEs). The programme , named “Tatva” which means “essence” in Sanskrit, is aimed at bridging the capital gap faced by SGEs between start-up and expansion stages.
Tatva will invest in early stage SGEs profitably delivering positive people-and-planet impact. The focus sectors are low income housing & utilities (e.g. energy, water & sanitation); microfinance; food & agribusiness; healthcare; education and livelihood creation.
The programme aims to contribute significantly to the country’s economic, social and developmental issues while adequately rewarding capital providers in the industry.
YES BANK also has a Sustainable Investment Banking unit which plays the role of a catalyst in bringing cleaner and newer technologies into the mainstream market. The unit has equity and debt exposures in alternate energy, renewable energy and water and sanitation projects.