00:00Hello and welcome. Sustainability is the talk of the hour, and we have a very special guest
00:05joining us today, Satish Ramchandani, co-founder of ABDAPT ESG Tech, and we will discuss the
00:11ESG landscape in India and globally. Satish, welcome.
00:16Thanks, Shruti.
00:18So what does ABDAPT do?
00:21So ABDAPT is an ESG tech firm, wherein we have built digital tools and wherein our tools
00:27would help medium to large businesses to digitize their entire sustainability journey. So what
00:33I really mean by that is, the way you have large financial accounting systems and reporting
00:39tools, our solution is for ESG accounting and reporting, right? So typically, our business
00:45would use a SaaS solutions to record the ESG data points, they can perform the entire carbon
00:51footprint accounting digitally, generate reports for regulatory purposes, and also for management
00:57reporting, a lot of AI and ML driven analytics for business insights.
01:02Right. You spoke about AI driven models. How do this technological ever evolving AI and
01:11blockchain intersect with ESG practices and reporting?
01:16I think, see, if you look at businesses, you know, specifically, large businesses where
01:22the data is spread across the operations, whether it's domestic businesses or global
01:27businesses, data sets, used data sets are of prime importance, right? So AI obviously
01:33enables companies to automate the entire data collection, analysis and reporting itself,
01:38reducing the manual effort and obviously improving the entire efficiency and accuracy, given
01:43that these data are auditable, and are going to be used by the market. And from a blockchain
01:49standpoint, obviously, we all know the core strengths of blockchain, right, right from
01:52transparency and the trust itself. So it aligns perfectly with the goals of the ESG reporting,
01:59right, which again, you're going to find the regulators, investors are going to use it,
02:03rating agencies are going to use it, right? So blockchain obviously allows for creation of
02:07tamper proof records.
02:10Okay. And say I was an investor, how can investors navigate through the ESG landscape?
02:18For example, in India, we have a little less robust regulatory frameworks. So how do an
02:27investor navigate through the landscape?
02:30Yeah, maybe I'll just spend about 30 to 60 seconds more on the context for some of the
02:34audiences, maybe, you know, going back to the ESG concept itself, right, which typically would be
02:42recording all the data around environment, social and governance, right? So environment would be
02:48all your energy, water, waste, transactions. Similarly, social would include health, safety
02:52records, you know, gender diversity and training, G would record all your governance and audit
02:58committee board meeting because of everything. So obviously, these, you know, beyond the
03:03regulatory reporting, also, these are fundamentally risk, you know, which the firm should really look
03:10at and ensure that you have enough controls to mitigate those risks. So essentially, it's a very
03:15prominent part of any business process. So though 30 countries have made ESG reporting mandatory
03:21in nature, or disclosures mandatory in nature, it's beyond just the regulatory reporting and it
03:26becomes very essential for the businesses to look at their ESG processes and, you know, how they
03:32are really performing. Specifically, from an investment standpoint, as you just mentioned,
03:37right, so investors, when they invest in a particular business or entity, whether it's a
03:42investor, a large investor, like a mutual fund or insurance company investing in large
03:46corporates or listed corporates, or for that matter, even VC or private equity firms,
03:51investing in, you know, small startups or growing startups, right? So they obviously look out for
03:56returns, which are more sustainable from a long term standpoint, right? So obviously,
04:01it's essential that they look at the ESG processes of the businesses, so that the returns what they
04:07are looking at, not only from a short term perspective, but also medium to long term
04:10perspective where the businesses are sustainable, right? We have seen businesses falling because of
04:15say, weak governance processes over medium to long term. And then again, you know,
04:20if you look at another set of investors, whether it's private equity or the VC,
04:25you know, they have their agreements and downsheets from their general partners,
04:30their limited partners, and, you know, their institutional investors, right? Given that so
04:35many investors have signed up to the UN PRI agreement itself, you know, in terms of the
04:40alignment to the ESG goals. Right. So AI and blockchain can, you know, bring some kind of
04:50disruption, some kind of challenges to these companies. In your view, how can these companies
04:56turn these challenges into opportunities for growth? No, I think, see, even technology would
05:04have some challenges, right? That's why you have firms, you know, InfoSec teams in companies, you
05:11have large IT teams, you know, to ensure that they're from a hardware standpoint or a software
05:16standpoint, you have enough controls. But obviously, you know, there's no denying the fact
05:21in terms of, you know, the benefits of smart digital tools, AI and ML embedded features in
05:28that, right? So from an ESG standpoint, how do you really manage the huge set of data, you know,
05:36across your business operations? How do you really calculate your GHG greenhouse gas or your carbon
05:42accounting? And how do you really make use of that data, which will give you further insights that,
05:49hey, here is where my energy consumption is going in a direction where I can really bring in
05:55efficiencies, or here is where my water consumption or my waste management processes, I see a lot of
06:01areas of improvement. So obviously, those deep data insights, you know, beyond the improvement
06:07in the processes from a data efficiency standpoint, but can also help you in cost efficiencies,
06:13where you can optimize the usage of energy, water and waste. Right, right. So moving on,
06:21moving on, Satish, what are some, some of the strategies that Indian companies are using to
06:27meet their ESG goals? So I think from an India standpoint, you know, I heard you sometime back,
06:33you know, in terms of India, what India is doing, or, you know, but I think with the BRSR,
06:40which is business responsive rating and sustainability reporting, as we all know,
06:43is now mandatory for 1000 listed companies by market capitalization, you know, and they have
06:48to report their performances from March 2023. Right. So that's, that's a really big positive
06:55move, right? Though it may sound regulatory, but by virtue of that reporting, we have a lot of
07:00companies, you know, who are investing in those processes. So that's one piece. Second, obviously,
07:05you know, with banks and rating agencies also seeking these data points, we have a lot of banks
07:12in India also, who are gradually mapping the ESG risk to their underwriting framework,
07:17right? Typically, for large loans, right? So again, you know, there's a benefit for the companies
07:24also to manage the ESG processes where they can negotiate with the banks on better terms.
07:29Similarly, with the investors, you know, when companies are raising funds, right,
07:32so the ability to raise funds, and then obviously, the ratings itself, right, better the ESG score,
07:37lower the risk. And hence, you know, you're getting a higher rating in the market itself,
07:42you know, from a reputation standpoint, or another financial metric standpoint, you know,
07:46adds on to your overall, overall BNN. So, so Indian companies are gearing up, I would say,
07:54what India was two years back, they're much better. One of the reasons is the BRSR. Second is
08:00the kind of investments which are happening in the renewal space. Again, you know, we are seeing a
08:06lot of investments in that space. Again, government is promoting a lot of these new age
08:13technologies, we have electric vehicles now being manufactured, consumers are gradually buying that,
08:18obviously, more support from the government specifically, so that the end consumer also
08:24starts using products and services which are energy efficient, right, from a cost standpoint
08:29would help. So Indian companies, I would say, are much better what it was two years back.
08:34At the corporate level, also, we are seeing a lot of sponsorship, you know, by the board and by the
08:39managing directors and the CEOs, you know, to invest in the ESG process. Obviously, it's a
08:44long way to go, no doubt about that. But I think the beginning has been really solid.
08:49Right. And how are private equity funds adapting to the increasing demand
08:56for sustainability, for sustainability investing? I think
09:04from a private equity standpoint, obviously, they are trying to create awareness in their
09:09portfolio companies. Some of many of the private equity firms have started collecting those ESG
09:15data points from their portfolio companies beyond the conventional financial metrics, you know,
09:20they have started seeking those ESG data points on a quarterly and annual basis.
09:24They are obviously building capacities in those firms. They are also doing ESG due diligence
09:30before investing and post investment also. So these are some of the initiatives which
09:35are the activities which the funds, the PEs are doing. Obviously, it also is a function of, you
09:41know, the nature of the business of the portfolio companies and the size of those investments.
09:47Again, private equity, you know, as per the term sheets, you know, which they have with their
09:52investors, you know, got to monitor the ESG performance of the entire portfolio and the fund.
09:57So again, as I said, you know, that that section of the business itself is also,
10:03you know, seeing traction. We have PE firms also who are starting investing in digital tools or
10:10due diligence processes of this entire activity. Yep. It's slow, but it's definitely happening.
10:16One last question, Satish. How does all this influence the long term success of investments?
10:26So, as I said, you know, eventually businesses exist for profits, right? And obviously you need
10:34to earn profits over long term rather than very high profits on short terms. Where I'm coming
10:41from is obviously to invest in your sustainability practices or ESG processes, right? And hence,
10:49eventually there is a balance sheet benefit, right? For example, if you don't invest or if
10:55you have a low environment score or, you know, health and safety of employees not taking care
11:00of their accidents, so it will impact your brand value, which would impact your performance,
11:05which would impact your stock price. Investors seeking these data points. So, if you have a
11:09higher ESG score, you could negotiate better with the investors in terms of the cost of funds or the
11:15ability to raise money. Same with the lenders. Again, all the rating agencies you could probably
11:20showcase, you know, your investments in the ESG processes and your scores itself and, you know,
11:26probably, as I said, have really deep engagements in terms of what the rating should be.
11:31So, from a long term standpoint, right, obviously it makes sense to invest in those ESG processes,
11:37constantly enhance your ESG score and metrics, right? And obviously, the entire business becomes
11:42more sustainable and you earn recurring and sort of consistent profits, you know, over time.
11:50Right, right. Thank you, Satish, for joining us today. The discussion was quite good. We got to
11:58know a lot of things about ESG and sustainability, which is the need of the hour, if I could say that.
12:06Thanks, Shruti. Thank you, viewers, for watching us. That was Satish Ramchandani,
12:11co-founder of DAPT ESG Tech. Subscribe to One India channel and never miss an update.
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