4 minute read 1 Feb 2022
India Inc on Net Zero path

India Inc on Net Zero path

By Damandeep Singh Ahluwalia

EY India Climate Change and Sustainability Services Associate Partner

An academician in the field of sustainability. A thought leader who advocates treating environmental sustainability as a pillar of the business, at par with financial success.

4 minute read 1 Feb 2022

Companies are taking the lead to help India realize its emissions commitments.

In brief

  • At the COP26 meet in Glasgow, India set a target to cut its net carbon emissions to zero by 2070.
  • For India to realize its emissions commitment, industry will need to step up. It appears that companies are taking the lead. 

India book-ended the COP26 climate change conference in November 2021 with two high-profile announcements. At the opening plenary, Prime Minister Narendra Modi committed India to achieving ‘Net Zero’ emissions by 2070 and strengthened the country’s 2030 commitments. This drew universal applause. But that sentiment gave way to gasps of disbelief when, at the closing plenary, Environment Minister Bhupender Yadav intervened to get the term “phase-out” of coal diluted to “phase-down” in the final text of the Glasgow Climate Pact.

India’s new 2030 commitments were a significant step-up from previous targets and are estimated to require an investment of over US$1 trillion. To put that in perspective, even US$100 billion in UNFCCC (United Nations Framework Convention on Climate Change) public finance commitments have remained unmet.

While global negotiators deliberated, the financial world announced that it was moving to realign private capital flows to support a Net Zero world. The Glasgow Financial Alliance for Net Zero (GFANZ), established with over $130 trillion of private capital commitment over three decades, will look to transform the global economy towards meeting Net Zero ambitions. Some of these 450 companies from 45 countries have already responded with action that will align their portfolios with the aim of limiting global warming to 1.5°C above pre-industrial levels.

As one of the world’s fastest-growing economies, India needed to be primed to tap into this monetary resource. Modi’s announcement of ramped-up renewable energy targets for 2030 demonstrated a decarbonization mindset that has a long-term vision (Net Zero by 2070) with mid-term targets.

A role for India Inc

Operationalizing this approach will rest predominantly on the shoulders of India Inc. Strikingly, a large proportion of top emitters in India are already on the pathway to a Net Zero future. While the climate change think-tank ecosphere in India is bubbling with new-found zeal in churning out Net Zero punditry, projections and debates, several companies are way ahead of experts and policymakers.    

By last count, 64 companies are well on their way to achieving Net Zero GHG emissions. While all of them have committed themselves to Science Based Targets, 28 of them have had their Net Zero targets validated. India’s biggest cement manufacturers and IT bellwether firms and many conglomerates are part of this group. Several others, including companies from the ‘hard-to-abate’ or carbon-intensive sectors are weighing their emission modelling against technological and financial projections.

Net Zero targets became the focus of India’s top climate change think-tanks in the lead up to U.S. Climate Envoy John Kerry’s India sojourn a few months ago; it then became the topic of weekly seminars, discussion papers and opinion pieces in the pink papers.

Kerry stressed the need for the U.S. and India to come together to accelerate technological innovation and fight climate change, and to expedite deployment of renewable energy across India by 2030, in line with the latter’s NDC (Nationally Determined Contributions) targets. He emphasised that the 2021-2030 decade would be “absolutely vital” for the world to meet the goal of limiting global warming to 1.5°C and to achieve Net Zero in 2050.

On the policy front, too, key government agencies have been moving the dial. In the summer of 2021, market regulator SEBI (Securities and Exchange Board of India) revised sustainability disclosure norms to make them far more comprehensive. The new Business Responsibility and Sustainability Report (BRSR) will apply from the 2022-23 fiscal year to the top 1,000 listed companies. This was evidently in anticipation of the setting up of a new International Sustainability Standards Board (ISSB) to develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.

The Reserve Bank of India, too, has joined the global Network for Greening the Financial System. It commits central banks to help in “strengthening the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development”.

Transparency is the key

The road is likely to be bumpy, but in an increasing carbon-constrained world, there will be winners and losers. Indian industry, which accounts for nearly a quarter of the country’s emissions, will have to be far more proactive. The coal habit will need to be “phased down” in an orderly, planned approach.

(The article first appeared in https://shaastramag.iitm.ac.in.)

 

Summary

Anticipating and mitigating risk will be of prime importance. As the world tweaks and strives towards standardization of sustainability standards, science-backed “credible decarbonization plans” will be at a premium. They will need to come with greater assurance and be open to public scrutiny.

About this article

By Damandeep Singh Ahluwalia

EY India Climate Change and Sustainability Services Associate Partner

An academician in the field of sustainability. A thought leader who advocates treating environmental sustainability as a pillar of the business, at par with financial success.