Ratin recently completed his MBA from London School of Economics and joined family business. Ratin's father Kesha Bhai was the Managing Director of Ratloi Chemicals Ltd, a chemical manufacturing company and he wanted Rat
CS Professional · Environmental, Social and Governance (ESG) Principles and Practice · PYQS · June 2025
Ratin recently completed his MBA from London School of Economics and joined family business. Ratin's father Kesha Bhai was the Managing Director of Ratloi Chemicals Ltd, a chemical manufacturing company and he wanted Ratin to take over the business. As a part of this transition, Ratin was trying to understand the industry and its prospects. Coming from a wider academic exposure, Ratin wanted to build a sustainable ecosystem for his business which also caters to the environmental requirements. He was planning to appoint consultants to do an Environmental, Social and Governance (ESG) study for his chemicals business and transition of the business towards ESG investing. Ratin briefed the Board of Directors about the ESG investing and its impact on the business. Some of the directors were skeptical and asked Ratin to explain, if there will be any challenges. In this background, outline the challenges faced by ESG investments.
Answer & Explanation:
There are many challenges that ESG investments currently face in India. Some of them are as listed below: Absence of quality data: Concrete data about a company's social, environmental, or governance performance is often procured through an analyst or a fund manager. An organization's sustainability report can also provide details on such information. Other documents where additional data on ESG can be found in annual reports, news articles, media releases, etc. For investors, finding concrete data on ESG of any company can be tedious and often inaccurate. Thus, the credibility of available information continues to be a hindrance in the growth of ESG investments in India. Absence of measurement standards: The Indian market currently lacks standardisation around ESG investing. Investors often use different names such as impact investing, sustainable investing, socially responsible investing, and also responsible investing. For further growth of this form of investing, there is a need for standardization in data collection, measurement standards, and methodology used while reporting. Traditional mindset: Many investors and fund managers find ESG to be an additional expense that is not essential. This aspect too curbs the growth of ESG investing in India. Limited track record of ESG funds: In India, ESG funds have started emerging in the past 2-3 years. Hence, there is also a lack of track record of ESG funds which may put off many investors from exploring this investing option. Lack of awareness: ESG investing is slowly gaining popularity among investors, but there's not much awareness among many about this aspect. More and more investors need to be made aware of the benefits of ESG investing to broaden the market horizon of the same.
Topics: ESG Investing
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