September 21, 2017
In 2014 the World Bank reported that environmental factors including air and water pollution, deforestation and natural disasters were costing India more than $80 Billion a year (just over 6% of its GDP). In addition to the human tragedy involved, that is something we would do well to remember particularly bearing in mind the severe flooding in the Northern Indian States at the moment. If nothing else it demonstrates the inescapable connectivity between the wider economy, local communities and the environment: a dynamic which sits at the very heart of Red Ribbon’s Mainstream Impact Investment Strategies for its Indian Market Portfolio.
But, of course, ongoing issues of poverty and rural poverty, in particular, have inevitably attracted more attention from Prime Minister Modi’s Government outside the prism of specific natural disasters such as those presently being experienced. In 2012, for example, just 36% of India’s population had access to rudimentary sanitation facilities.
For this reason, much of the discussion on sustainability in India has tended to focus on improving social inclusiveness; bringing the population at large and the rural population in particular up to a common standard. That ideology is certainly at the heart of recent Government initiatives on Green Energy Generation where a key focus was the need to bring sustainable, reliable electricity supplies to India’s rural poor for the first time.
In 2014 the Indian Government also launched the Swachh Bharat (or Clean India) Campaign as part of a five-year effort to improve sanitation on the Ganges and other heavily polluted rivers with the aim of making India clean by 2019 and both Domestic and Multinational Companies have proved important partners in delivering sufficient traction for the Project.
There’s a particular fiscal reason for that as well.
In 2013 India became the first country in the world to introduce a mandatory Corporate Social Responsibility programmes (CSR) which requires some 8,000 companies doing business in India to invest at least 2% of their annual profits in CSR initiatives; and as a result of that programme more than $2 Billion a year is now being invested in poverty reduction programmes as well as social and environmental initiatives The legislation also requires companies to make the relevant investment, wherever possible, in their local communities.
All of which is, of course, admirable and the resulting investment is certainly working its slow way into the roots of the Indian Economy, but is this really what we mean when we talk about investing in sustainable projects? All too often, fiscal incentives of this kind can give rise to a tick box mentality at an executive level, treating sustainability as just another (necessary) cost of corporate compliance. But it can be so much more than that. Profound and resilient long-term change is much more likely to be achieved by decoupling economic growth from it’s “adverse social and environmental consequences”; favouring investment in businesses that do not regard sustainability as a compliance exercise, but as a means of securing a competitive advantage, a resilient business and long-term financial sustainability”
That’s what Mainstream Impact Investment is all about.
Mainstream Impact Investment Strategies recognize the importance of the delicate balance between communities, the wider society and the environment at large; driving effective sustainability by tapping into mainstream market economics and delivering long-term, resilient change in the process; not just by way of one-off projects that are fiscally attractive in the short term. That is why Red Ribbon Asset Management has placed Mainstream Impact Investment Strategies at the centre of its Portfolio Management Policies. Delivering above market rate returns as well as sustainable, positive change in the process.
Read about the World Bank Report here: www.worldbank.org/en/country/india
Read about the Indian Corporate Responsibility Programme here: https://www.pwc.in/assets/…/handbook-on-corporate-social-responsibility-in-india.pdf