S&P gets responsible

Standard & Poor’s and its Indian affiliate CRISIL are to head a consortium that will develop the first index of emerging market companies based on their environmental, social and corporate governance (ESG) performance.

The initiative is backed by the International Finance Corporation, the private arm of the World Bank, which will provide funding to a consortium comprising Standard & Poor’s, CRISIL and KLD, the social and environmental research firm, to develop the new benchmark.

Under the project, a pilot index will be created in India, comprising of leading Indian companies that meet certain ESG criteria, and will be marketed to local and international investors. It is hoped that this index will serve as a model for other emerging markets, helping to further enhance their appeal to international investors, facilitating the development of new investment products, and providing a mechanism to further improve ESG standards.

"International investors are increasingly interested in companies with sound environmental, social responsibility and governance credentials, but they find it difficult to make investment decisions without robust, independent benchmarks in this area," says London-based Cynthia Stone, managing director at S&P.

S&P hopes that this index project will create a widely accepted measure that investors will use to select and monitor investments in progressive companies, initially in India, but ultimately throughout the emerging markets, she adds.