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Adani Enterprises out from S&P Dow Jones Sustainability Indices, what does it mean?

On Thursday, S&P Dow Jones Indices announced that it would remove Adani Enterprises, the flagship company of the Adani Group

By Pallav Jain
New Update
S&P Dow Jones Indices announced that it would remove Adani Enterprises, the flagship company of the Adani Group, f

On Thursday, S&P Dow Jones Indices announced that it would remove Adani Enterprises, the flagship company of the Adani Group, from its Sustainability Indices. S&P Dow Jones has taken this decision following the allegations of stock manipulation and accounting fraud by the Adani group in the Hindenburg's research report.

Let us understand what is Sustainability Index and how important it is for any company.

According to the website of the S&P Dow Jones Sustainability World Index, S&P Global identifies global sustainability leaders through its Corporate Sustainability Assessment. The Dow Jones Sustainability Index represents the 10 percent top 10 global companies.

Once out of this, the Adani group will become less appealing to environment-conscious investors.

What is Corporate Sustainability Assessment?

CSA i.e. Corporate Sustainability Assessment was started in the year 1999.

S&P acquired CSA in the year 2019.

CSA assesses the participating companies through a questionnaire. Based on their performance, 0 to 100 percent marks are awarded.

Companies are ranked on the basis of economic, social, and environmental as well as 20 other financially relevant sustainability criteria.

What is Environment Social Responsibility and Governance (ESG)?

ESG stands for Environment Social Responsibility and (Corporate) Governance. In the last few years, it has become the criterion for investors all over the world including India to assess any company for investments.

Millennials and the young population in India invest by keeping the environment in their minds. Because it is easier for companies with good ESG ratings to survive in the market. With this, they remain assured that the company in which the investment is being made has less risk on environmental and social grounds. Such companies have good cash flow and better borrowing costs.

ESG Investing can also be called Sustainable Investing. Those who are ESG investors avoid investing in companies that are harming the environment or society in any way. For example, chemical companies that spread pollution or those companies where employees are not treated well.

Tata Group is an example of a responsible company in India. The opening of Hotel Taj by the Tata group for health workers during the initial days of Covid 19 and being the first to help the nation during every disaster adds to their brand loyalty.

ESG investing is becoming popular all over the world including in India. Many companies in India have taken out their ESG funds in India, for example:-

  1. Aditya Birla Sun Life ESG Fund
  2. Axis ESG Fund
  3. ICICI Prudential ESG Fund
  4. Kotak ESG Opportunities Fund
  5. Mirae Asset ESG Sector Leaders ETF
  6. Quantum India ESG Equity Fund
  7. SBI Magnum Equity ESG Fund

Why ESG is Important?

In the last few years, many sustainability challenges are being faced such as flood risk, sea level rise, privacy threat, data security, regulatory challenges, etc.

Violating environmental and social rules become challenging in a long term. To avoid the risk businesses all over the world look into the ratings of ESG ranking provider agencies like S&P Dow Jones.

Companies that maintain ESG standards will emerge as sustainable establishments in the long term.

Removal of Adani's flagship company Adani Enterprises from the S&P and Dow Jones sustainability indices will affect their business badly.

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