53 Companies Estimate Financially Impactful Climate-Related Risks At Rs 1,434 Billion: CDP Report

The latest edition of the Carbon Disclosure Project (CDP) annual India disclosure report 2021, which was released on Saturday, reveals some positive and not-so-positive developments in the Indian corporate sector with regard to carbon emissions. In the backdrop of the IPCC report earlier this month, the CDP report assumes significance. Based in different countries, the not-for-profit organization helps companies disclose their environmental impact. 

Starting on a positive note, 88 Indian companies disclosed information across CDP’s 3 themes—Climate Change, Water Security and Forests in 2021 as compared to 69 in 2020, marking an increase by 28 per cent. The report notes that several business leaders are already playing a key role in the climate fight, due to the growing customer and investor focus on sustainability, and increasing regulatory and disclosure requirements. It adds that some big corporate houses are on track with clear net-zero targets as determined by increasing investor pressures, consumer perception, and regulatory compliance requirements to conduct their operations responsibly.

Climate Change 

Corporate climate governance is a matter of concern for several Indian businesses. The report highlights that it has in fact become a core element of the internal management system of businesses across companies responding to the CDP questionnaire on climate change. In 2021, 98 per cent of the responding companies have board-level oversight, and 71 per cent report to the board at least once in three months on climate issues.

ACC, Infosys Limited, Mahindra & Mahindra, Tech Mahindra, Wipro, Ambuja Cements, ITC Limited, JSW Energy, JSW Steel Ltd, Mahindra Lifespace Developer Limited, Mindtree Ltd., Reliance Jio Infocomm Limited have emerged as Climate Change leaders with scores ranging from A to A-. 

According to the Global Climate Risk Index 2021, India is the 7th most climate-vulnerable country. 

Fifty-three companies have identified 77 acute physical risks--extreme weather events that pose a direct threat to the livelihood of people and organizations.

These financially impactful climate-related risks have been valued at Rs. 1,434 billion. Coming to emissions, responding companies have reported total carbon equivalent emissions of about 1.2 billion tonnes. There is an increase of 39 per cent as compared to 2020 figures because of an increase in the number of responding companies this year. 

Water security 

Author Mridula Ramesh in her book Watershed: How We Destroyed India's Water and How We Can Save It which was released last year warned that “Given India's rising population, urbanization and wealth, about half of India's overall water demand may go unmet by 2030”. It implies not just severe water scarcity but a loss in the country’s GDP by 6 per cent. 

The 37 companies that took up CDP’s Water questionnaire reported having withdrawn, consumed, and discharged 10.4 million, 1.6 million, and 9.6 million megalitres of water, respectively. The report observes, In 2020, these figures stood at 7.9 million, 1.4 million, and 6,6 million megalitres, respectively (for 25 companies)." While the number of disclosing companies rose by 48 per cent, the volume of water consumption rose by 15 per cent by corporates. 59 per cent of the responding companies termed water as “vital” for their operations whereas 73 per cent categorized it as ‘material risk’. 

The report also reveals that inaction costs 12 times more than action. While total water-related risk stands at Rs. 4,527 million, the total cost of responding to risk would only cost Rs. 365 million.

Hindustan Zinc, Ultratech Cement and Dr Reddy’s Laboratories, Ambuja Cements, Mahindra& Mahindra, and Tech Mahindra emerge as water security leaders. 

Forests

As per CDP 2021 disclosure data, three in five companies reported an estimated financial impact of Rs 6.1 billion due to forest risk commodity – this in all cases relating to palm oil, and in two to food and beverage and another to chemicals or materials.

CDP report also mentions Renewable Energy disclosures which is pertinent keeping in mind the country’s ambitious target of 500-gigawatt (GW) renewable energy by 2030.

In 2021, 85 companies headquartered in India have reported a total of 271 TWh electricity consumption. Of this, the total renewable electricity consumption is reported to be 13 TWh which is just 5 per cent of the total electricity consumption reported in 2021. A total of 47 companies have identified transition opportunities towards low carbon energy usage in 2021 as compared to 34 companies in 2020. 

Cities

CDP has also given scores to three cities: Surat - A-; Bengaluru - D; Mumbai - D. 

In 2019, the Ministry of Housing and Urban Affairs (MoUHA) introduced a reporting initiative called the ‘Climate Smart Cities Assessment Framework’ (CSCAF) as a toolkit for cities to assess their climate situation. Out of 14 cities that reported their environmental and climate data in 2021, Kolkata, Chennai, Surat, and Kochi, have made special budget allocations, focusing on green initiatives in their recovery plans.