India Equity Research ESG March 08, 2021
Edelweiss ‘ESG Way’ Series ESG Index
Customise your ESG India basket
As part of our ‘ESG Way’ series, we have developed an ESG India 100 free float-weighted index based on: 1) integrating ESG disclosure
scores of companies; 2) negative screeners; and 3) six ESG themes unique to India, which we believe will sustain long-term opportunities.
Sector leaders IT, gas and healthcare carry the highest weightings in Edelweiss ESG Index. While IT outshines across filters, gas and
healthcare gain from our positive filter. The cement sector clocks high disclosure scores, offset by our -50% weighting. Laggards chemicals and metals are splashed in red across all three filters, and tobacco (ITC) is the largest UW due to our –75% weighting. FMCG and BFSI suffer from the lowest disclosure scores across E, S and G.
Our basket marries key global trends with India-specific ESG themes
According to GSIA, investors use one or a mix of seven broad ESG strategies. We Our ESG Index weight revisions basis…. (%)
Our final combine three major filters: 1) Negative/Exclusionary is most common accounting Integrating Positive Original Negative ESG index, Sector ESG India weight (%) filter after all 3 for half of global ESG AUM. We mark down companies linked to tobacco/alcohol disclosures themes filters and defence by 75%. Coal, oil, cement, metals, and coal-based power are marked BFSI 30.44 24.12 35.08 32.54 30.22 IT 14.97 19.22 17.25 16.00 24.08 down by 50%. 2) ESG Integration is the second largest and, in fact, the fastest Oil & Refinery 10.09 11.61 8.27 10.45 9.96 growing (69%, 2016–18). We overlay Bloomberg’s disclosure scores for individual FMCG & Retail 7.95 5.87 9.16 6.80 5.88 Auto 7.11 7.66 6.14 6.08 5.76 companies along with E, S & G granularity. We are developing our own scores as Pharma & Hospital 4.95 4.27 5.70 5.29 5.35 Cement 3.53 4.83 2.20 3.77 3.23 well. 3) Finally, we overlay six India-specific ESG business opportunities that have Engineering 3.26 4.15 2.43 2.79 2.69 direct economic and ESG benefits and should add quantitatively and sustainably to FMCG & Chemicals 2.99 2.75 2.58 3.11 2.48 Metals 2.86 3.01 1.65 2.44 1.51 growth: affordable housing, employability, financial inclusion, healthcare, Telecom 2.78 2.73 3.21 2.38 2.74 Tobacco/Alcohol 2.59 3.42 0.75 2.22 0.86 digitalisation and environment. Power 1.89 2.11 1.12 1.66 1.11 Gas & pipeline 1.32 1.53 1.21 1.41 1.57 How we differ from MSCI and NSE ESG indices Logistics 0.96 1.01 1.11 0.84 1.04 Real Estate/Infra 0.69 0.59 0.59 0.59 0.44 Our index is more broad-based with 100 stocks. MSCI India ESG Leaders Index has Renewable Power 0.68 0.46 0.79 0.73 0.58 Chemicals 0.45 0.35 0.26 0.38 0.18 35 stocks with top five accounting for 60% of the index weight. RIL and HDFC carry Entertainment 0.26 0.14 0.30 0.28 0.18 2–3x weight versus our index. Nifty 100 ESG Index, which comprises 90 stocks, does Aviation 0.25 0.17 0.21 0.26 0.16 not include RIL in top 10 versus 8.9% in our index. We have a greater skew towards Edelweiss ESG report repository IT (our digitalisation theme) and a low weighting for ITC (our -75% filter).
India 2025 - Seeking Growth The ESG Way Stock leaders: TechM, Wipro, Dr Reddy’s, GAIL, L&T Infotech Global ESG juggernaut accelerates; calling on India In order to have the highest increase in weighting in Edelweiss ESG Index, a UK-India ESG Forum – Mind the gap particular stock must stand out on all three parameters. The IT sector in general, ESG Disclosures levels: Lagging, but catching up and Tech Mahindra, Wipro and L&T Infotech within the IT pack in particular stand out. Similarly, Dr Reddy’s in the pharma/healthcare sector and GAIL as a leader in Tobacco vs Alcohol: Is ESG reshaping valuations? the gas sector rank among the top five standout stocks within our ESG Index. In
CARO 2020: Tightening the governance grip comparison: the top five weights for the MSCI India ESG Leaders Index are Reliance, Infosys, HDFC, TCS and HUL; and for the Nifty 100 ESG Index, the top five weights COVID-19: Testing Corporate India Social quotient are Infosys, HDFC, TCS, HDFC Bank, and HCL Technologies. Impact Investing: A humane approach
Jal Irani Alok Deshpande Aditya Narain +91 (22) 6620 3087 +91 (22) 6620 3163 +91 (22 )6620 3061 [email protected] [email protected] [email protected]
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Summary Charts
3 filters – Negative, Integration and six India-positive Sector gains: IT, gas, health; Hits - Tobacco, themes chemicals and metals Our ESG Index weight revisions basis…. (%) 65% Our final Integrating Positive Original Negative ESG index, Sector ESG India weight (%) filter after all 3 38% disclosures themes filters 11% BFSI 30.44 24.12 35.08 32.54 30.22
IT 14.97 19.22 17.25 16.00 24.08 (%) -16% Oil & Refinery 10.09 11.61 8.27 10.45 9.96 FMCG & Retail 7.95 5.87 9.16 6.80 5.88 -43% Auto 7.11 7.66 6.14 6.08 5.76 Pharma & Hospital 4.95 4.27 5.70 5.29 5.35 -70%
Cement 3.53 4.83 2.20 3.77 3.23 IT
Engineering 3.26 4.15 2.43 2.79 2.69 BFSI
Auto
Power Metals
FMCG & Chemicals 2.99 2.75 2.58 3.11 2.48 Cement
Aviation
Logistics Telecom
Metals 2.86 3.01 1.65 2.44 1.51 Chemicals Engineering
Telecom 2.78 2.73 3.21 2.38 2.74 Refinery & Oil
Gas & pipeline & Gas
FMCG & Retail & FMCG
Entertainment Tobacco/Alcohol
Tobacco/Alcohol 2.59 3.42 0.75 2.22 0.86 Estate/Infra Real
Renewable Power Renewable
Pharma & Hospital & Pharma FMCG & Chemicals & FMCG Power 1.89 2.11 1.12 1.66 1.11 Source: Edelweiss Research, Bloomberg. Source: Edelweiss Research Note: Green/Red colour indicate increase/decrease in weights in comparison to actual weights highlighted in yellow
Stock gains: TechM, Wipro, Dr Reddy’s, GAIL, LTI Stock hits: UNSP, ITC and low disclosures weigh
85% 0%
68% -17%
51% -34% -51% 34% -68% 17% -85%
0%
ITC
UPL
MRF
GSPL
PLNG
Lupin
TCS
Hero
Cipla
Indigop
Airtel
M&M
Ipru Life Ipru
Wipro
Siemens
Hindalco
Maruti
Pidilite
Marico
Infosys
Havells
Coal India Coal
Tata Steel Tata
SBI Bank SBI
Dr Reddy
Axis BankAxis
GAIL India GAIL
Bharat forge
Berger Paints Berger
Quess Corp Quess
United Spirits
Adani Ports Adani
Eicher Motors Eicher
Bajaj Holdings Bajaj
L&T Infotech
Ashok Leyland Ashok
Adani Enterprise Adani
Motherson Sumi Motherson Muthoot Finance Tech MahindraTech Source: Edelweiss Research Source: Bloomberg, Edelweiss Research
MSCI ESG is IT, energy heavy; we are BFSI, health MSCI top 5 stocks is 60% weight with RIL, INFY 31%
40.0 20.0 30.2 30.2 17.2 32.0 24.1 16.0 13.8 13.3 24.0 18.5 18.6 12.0 11.4 (%) 14.3 9.6 16.0 11.5 8.9 8.9 (%) 9.2 8.0 6.7 6.1 8.0 4.9 6.2 5.4 6.1 2.7 5.3 2.7 4.9 2.3 2.2 1.1 0.5 4.7 3.0 0.0 0.4 4.0 2.2 3.3 2.3 2.0
1.7 1.9 2.2 1.5 IT
0.0
Energy
TCS
HUL
Materials
Financials
Airtel
HDFC
Industrials
M&M
Real Estate Real
HealthCare
Infosys
Reliance
Axis Bank Axis
Communication…
Asian Paints Asian Consumer Staples Consumer
MSCI India ESG Edelweiss ESG MSCI India ESG Edelweiss ESG Technology HCL
Consumer Discretionary Consumer Source: Edelweiss Research, MSCI Source: Edelweiss Research, MSCI
2 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
We differ from MSCI and NSE ESG indices
Evolution of Indian and global ESG indices We highlight interesting trends in the evolution of global ESG indices. The initial ones were broad-based with focus on ‘Environmental’ issues. Unsurprisingly, the ‘negative screening or exclusionary’ ESG strategy was more popular then. However, recent ESG index launches are more based on specific social or governance themes or impact investing. India, currently in the nascent phase of ESG investing, understandably shows a skew towards broad-based ESG indices.
Overall, seven ESG indices have been launched in India since 2012 (Nifty 100 ESG Sector Leaders being the latest—launched in 2020). Of all the ESG indices launched in India, Nifty 100 ESG is broadly used as a benchmark by several mutual fund houses to gauge their fund performance. In our report, we have made comparison with two broadly used indices, namely, Nifty 100 ESG and MSCI India ESG. Edel ESG Index vs Nifty 100 ESG Index: RIL, ITC and IT sector key differences Background of Nifty 100 ESG Index The Nifty 100 ESG Index, launched in 2018, is designed to reflect the performance of companies within Nifty 100 Index based on Environmental, Social and Governance (ESG) score. The index can be used for a variety of purposes such as benchmarking, creation of index funds, ETFs and structured products.
Nifty 100 ESG Index methodology:
1. Number of constituents in index is variable.
2. Sector weights are based on free float market capitalisation.
3. Number of constituents in index is 90.
4. Each constituent within sector is ESG tilt weighted and capped at 10%.
Where do we differ?
We differ with Nifty 100 ESG Index largely in Automobile and Oil & gas sectors. Oil & gas weights in our index (11.5%) consists of Reliance Industries (8.9%), which we believe is not included in the Nifty ESG index. While Automobile weights in Nifty 100 Index is 5.1%, its weight in Nifty 100 ESG Index is 10.2%. We arrive at a 5.9% weighting for the automobile sector based on our calculation. Moreover, our 125% weight for digitisation enhances the IT sector’s weight, while a -75% weight for ITC weighs down the entire consumer sector.
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 3
ESG
Free float market cap weight comparison of sectors
Nifty ESG vs. Edelweiss ESG Index 40.0 30.2 32.0 30.0 24.1 24.0 21.8
(%) 13.5 16.0 10.2 11.5 9.4 5.9 4.5 5.3 8.0 3.5 3.1 2.6 2.4 4.4 2.7 2.0 1.4 0.7 3.2 1.7 1.5 1.8 1.01.0 0.2 0.3
0.0
IT
Power
Metals
Pharma
Cement
Services
Telecom
Oil & Gas
Industrials
Automobile
Construction
Consumer Goods Financial ServicesFinancial Nifty ESG Edelweiss ESG & Pest.Chemicals
Source: Edelweiss Research, NSE
Edel vs Nifty ESG Index – IT sector, RIL and HDFC are big differences
Nifty ESG vs. Edelweiss ESG Index 15.0 11.4 12.0 9.0 6.6 6.7 (%) 5.4 5.2 6.0 5.5 3.8 2.8 3.0 2.5 2.5 2.4 2.3 2.3 3.0 1.7 1.7 1.6 1.7 NA 0.5
0.0
TCS
HDFC
Wipro
Infosys
Bajaj Auto
HDFC Bank HDFC
Kotak Bank
Bajaj Finance Tech MahindraTech Nifty ESG Technology HCL Edelweiss ESG
Source: Edelweiss Research, NSE MSCI India ESG Index: MSCI has 35 stocks with 60% weight for top 5 Background of MSCI India ESG Leaders Index
The MSCI India ESG Leaders Index (launched in 2013) is a capitalisation weighted index that provides exposure to companies with high ESG performance relative to their sector peers. The index is designed for investors seeking a broad, diversified sustainability benchmark with relatively low tracking error to the underlying equity market.
MSCI India ESG Leaders Index methodology:
5. Includes securities of companies with the highest ESG ratings representing 50% of the market capitalisation in each sector and region of parent index.
6. Number of constituents in index is 35.
7. The index is float-adjusted market capitalisation weighted.
4 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Where do we differ with MSCI weights?
Our derived weighting for the financial sector (30.2%) is significantly higher than MSCI India. This is largely because of a high number of relevant constituents (10) considered in our calculation as against MSCI India (3–4). Besides, weights of some individual companies in MSCI India such as Reliance and HDFC are 2x our weights given its low base (number of constituents is 35). Notably, the top 5 stocks (Reliance, Infosys, HDFC, TCS and HUL) make up 60% of weight in the MSCI India ESG Leaders Index.
Free float market cap weight comparison of key sectors
MSCI India ESG vs. Edelweiss ESG Index 40.0 30.2 30.2 32.0 24.1 24.0 18.5 18.6 14.3 (%) 16.0 11.5 9.2 8.9 4.9 6.2 8.0 6.1 2.7 5.3 2.7 2.3 2.2 1.1 0.50.4
0.0
IT
Energy
Materials
Financials
Industrials
Real Estate Real
Health Care
Services
Communication Consumer Staples MSCI India ESG Edelweiss ESG
Consumer Discretionary Source: Edelweiss Research, MSCI
Free float market cap weight comparison of top 10 stocks
MSCI India ESG vs. Edelweiss ESG Index 20.0 17.2 16.0 13.8 13.3 12.0 8.9 11.4 9.6
(%) 6.7 8.0 5.4 6.1 4.9 4.7 3.3 3.0 4.0 2.2 2.3 2.0 1.7 1.9 2.2 1.5
0.0
TCS
HUL
Airtel
HDFC
M&M
Infosys
Reliance
Axis Bank Axis Asian Paints Asian
MSCI India ESG Edelweiss ESG Technology HCL
Source: Edelweiss Research, MSCI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 5
ESG
The shift: IT, gas gain; tobacco, chem hit Sector weight shift attributable to aggregate of all three filters Our ESG India Index rebalances the weights of the top 100 stocks by free float market capitalisation, based on three key criteria:
1. ESG integration: We use ESG disclosure scores of individual companies.
2. Negative/exclusionary filters.
3. Six India-specific ESG themes that we believe will unleash and sustain growth in long term. Sector leaders: IT, gas, pharma/hospitals Of the 20 sectors that we have analysed, IT, gas and pharma/hospital among large sectors have the highest increase in weight in the rebalanced 100 ESG Index. Notably, while IT gains across filters, gas and pharm sectors primarily gain due to our positive filter. Tobacco (ITC) and cement sectors have very high disclosure scores, but are heavily weighed down due to their negative weights. …and laggards: Tobacco, chemicals and metals Chemicals and metals are splashed in red across all three filters and tobacco (ITC) is the largest UW due to our –75% weight despite having a high disclosure score. FMCG and BFSI suffer from the lowest disclosure scores of 28/100 and 30/100, respectively, due to below average disclosures across E, S and G.
BFSI, IT, oil, FMCG, autos retain largest weights Positive shift: IT, gas; Worst hit: Tobacco, chemicals
65% 35 30 30 28 24 38% 21 15
(%) 11% 14 10 8 10 6 76 5 5 43 33 32 3 33 3 (%) 7 2 1 21 12 11 10 1 1 -16% 0
IT -43%
BFSI
Auto
Power
Metals Cement
Logistics -70%
Telecom
IT
Engineering
BFSI
Auto
Oil & Refinery & Oil
Power
Gas & pipeline Gas&
FMCGRetail &
Metals
Cement
Aviation
Logistics
Telecom
Real Estate/Infra Real
Tobacco/Alcohol
Chemicals
Renewable Power Renewable
Pharma & Hospital & Pharma
FMCGChemicals &
Engineering
Oil & Refinery & Oil
Gas & pipeline & Gas Entertainment
Actual weight Weight based on all filgters Retail & FMCG
Tobacco/Alcohol
Real Estate/Infra Real
Renewable Power Renewable
Pharma & Hospital & Pharma FMCG & Chemicals & FMCG
Source: Edelweiss Research Source: Edelweiss Research
6 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
While IT gains across filters, real estate/infra & chemicals lose Our ESG Index weight revisions basis…. (%)
Our final Integrating Positive Original Negative ESG index, Sector ESG India weight (%) filter after all 3 disclosures themes filters
BFSI 30.44 24.12 35.08 32.54 30.22 IT 14.97 19.22 17.25 16.00 24.08 Oil & Refinery 10.09 11.61 8.27 10.45 9.96 FMCG & Retail 7.95 5.87 9.16 6.80 5.88 Auto 7.11 7.66 6.14 6.08 5.76 Pharma & Hospital 4.95 4.27 5.70 5.29 5.35 Cement 3.53 4.83 2.20 3.77 3.23 Engineering 3.26 4.15 2.43 2.79 2.69 FMCG & Chemicals 2.99 2.75 2.58 3.11 2.48 Metals 2.86 3.01 1.65 2.44 1.51 Telecom 2.78 2.73 3.21 2.38 2.74 Tobacco/Alcohol 2.59 3.42 0.75 2.22 0.86 Power 1.89 2.11 1.12 1.66 1.11 Gas & pipeline 1.32 1.53 1.21 1.41 1.57 Logistics 0.96 1.01 1.11 0.84 1.04 Real Estate/Infra 0.69 0.59 0.59 0.59 0.44 Renewable Power 0.68 0.46 0.79 0.73 0.58 Chemicals 0.45 0.35 0.26 0.38 0.18 Entertainment 0.26 0.14 0.30 0.28 0.18
Aviation 0.25 0.17 0.21 0.26 0.16 Source: Edelweiss Research, Bloomberg
Note: Green/red colour indicate increase/decrease in weights in comparison to actual weights highlighted in yellow
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 7
ESG
Filter 1: Weight shift attributable to ESG integration ESG integration is the second largest screener globally, which has grown by a stunning 69% over the past two years (2018 over 2016).
We integrate the ESG disclosure scores of individual companies and accordingly either increase or decrease weights of companies in the revised ESG Index. Currently, we use Bloomberg’s ESG disclosure scores, but shortly we will incorporate our proprietary model for the same. Leaders: Cement, tobacco and IT… Of the 20 sectors that we have analysed, cement, tobacco and IT have the highest ESG disclosure scores in India.
….and laggards: FMCG and BFSI, among the large sectors Among large sectors, FMCG and BFSI have the lowest disclosure scores of 28/100 and 30/100 scores, respectively, due to below average disclosures across E, S and G.
ESG disclosure scores – Cement, tobacco lead; FMCG, BFSI lag
Disclosure scores Weights based Environment Social Governance Sector ESG on all filters (E) (S) (G) Cement 3.2 48.9 52.0 61.8 52.6 Tobacco/Alcohol 0.9 46.2 50.7 61.1 50.7 IT 24.1 39.8 60.2 60.3 49.3 Engineering 2.7 40.6 51.7 65.4 49.0 Gas & pipeline 1.6 24.6 45.1 46.2 44.5 Oil & Refinery 10.0 41.0 32.6 63.4 44.2 Power 1.1 30.5 48.9 65.7 43.0 Auto 5.8 35.6 40.0 56.3 41.4 Logistics 1.0 27.7 43.4 49.8 40.5 Metals 1.5 30.2 40.4 63.9 40.4 Weighted Average 28.6 40.6 56.9 38.4 Telecom 2.7 23.8 41.7 64.0 37.7 FMCG & Chemicals 2.5 25.1 44.2 49.9 35.4 Pharma & Hospital 5.3 22.1 38.6 52.9 33.1 Real Estate/Infra 0.4 18.5 46.4 52.6 32.9 BFSI 30.2 18.4 32.1 52.8 30.4 Chemicals 0.2 14.0 33.3 64.3 30.2 FMCG & Retail 5.9 16.3 31.3 53.2 28.3 Renewable Power 0.6 13.2 33.3 48.2 26.0 Aviation 0.2 10.9 38.6 48.2 26.0 Entertainment 0.2 4.7 33.3 44.6 20.7 Source: Edelweiss Research, Bloomberg
8 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Low disclosures by BFSI, FMCG & pharma sectors High disclosures by cement, tobacco & IT sectors
40% Change in weights based on ESG disclsoure 35 30 30 22% 28 24 21 15 4% (%) 10 14 10 8 7
6 6 (%) 5 5 43 3 3 7 3 2 32 33 3 1 21 12 11 10 1 1 -14% 0
IT -32%
BFSI
Auto
Power
Metals Cement
Logistics -50%
Telecom
IT
Engineering
BFSI
Auto
Oil & Refinery & Oil
Power
Gas & pipeline Gas &
FMCG & Retail
Metals
Cement
Aviation
Logistics
Telecom
Real Estate/Infra Real
Tobacco/Alcohol
Chemicals
Renewable Power Renewable
Pharma & Hospital & Pharma
FMCG & Chemicals
Engineering
Oil & Refinery & Oil
Gas & pipeline Gas
Entertainment FMCG & Retail FMCG
Actual weight Weight based on all filgters Estate/Infra Real
Tobacco/Alcohol
Renewable Power Renewable
Pharma & Hospital & Pharma FMCG & Chemicals FMCG
Source: Edelweiss Research, Bloomberg Source: Edelweiss Research, Bloomberg
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 9
ESG
Filter 2: Weight change due to negative screening The largest sustainable investment strategy globally continues to be negative or exclusionary screening, accounting for more than half of ESG assets under management (USD30.7tn during 2018).
Similarly, we utilise negative screening as one of the three criteria. We have reduced index weights of companies by their presence in a particular sector (refer to exhibit 13).
Negative sector filter – Tobacco and defence carry least weight
Tobacco/Alcohol 25% Defense 25% Oil & Refinery 50% Chemicals 50% Coal 50% Metals 50% Cement 50% Pow er 50% Auto 75% Engineering 75% Real Estate/Infra 75% Aviation 75% Gas & pipeline 75% FMCG & Chemicals 75% IT 100% BFSI 100% FMCG & Retail 100% Telecom 100% Logistics 100% Entertainment 100% Pharma & Hospital 100% Renew able Pow er 100%
Source: Edelweiss Research, Company
10 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Worst hit: Tobacco: -75%, metal/power/cem: -50% Sectors without –ve filters see enhanced weights
40 35 30 Change in weight based on negative filter 32 20% 24 0% 1517 (%) 16 10 8 9 -20% 8 7 5 6 8 6 4 32 33 3 33 3 2 2 1 21 11 11 11 11 (%) -40% 0
IT -60%
BFSI
Auto
Power
Metals Cement
Logistics -80%
Telecom
IT
Engineering
BFSI
Auto
Oil & Refinery Oil
Power
Gas & pipeline
FMCG & Retail & FMCG
Metals
Cement
Aviation
Logistics
Telecom
Real Estate/Infra Real
Tobacco/Alcohol
Chemicals
Renewable PowerRenewable
Pharma & Hospital Pharma
FMCG & Chemicals
Engineering
Oil & Refinery & Oil
Gas & pipeline Gas Entertainment
Actual weight Weight based on ESG negative filter & Retail FMCG
Real Estate/Infra Real
Tobacco/Alcohol
Renewable Power Renewable
Pharma & Hospital & Pharma FMCG & Chemicals FMCG
Source: Company, Edelweiss Research Source: Company, Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 11
ESG
Filter 3: Edelweiss’s India-specific ESG positive sectoral themes In addition to the two universally popular global filters, we shortlist six unique India- specific business opportunities that have direct economic and ESG benefits, and should add quantitatively and sustainably to India’s growth.
We have ascribed a 125% weighting for stocks falling in these themes. These themes are affordable housing, employability, financial inclusion, healthcare, digitalisation and environment.
For further details, refer to the detailed report India 2025 - Seeking Growth The ESG Way
Positive filters - Edelweiss “ESG Way” weight enhancement by 25%
Our ESG Index weight revisions basis…. (%)
Our final Integrating Positive Sectors (based on Original Negative ESG index, ESG India positive filters) weight (%) filter after all 3 disclosures themes filters
Financial Inclusion 18.91 16.96 21.79 20.21 21.24 Digitisaton 23.49 28.66 24.61 25.10 32.94 Affordable Housing 15.21 12.83 14.91 16.25 12.55 Healthcare 7.41 5.65 8.54 7.92 7.08 Environment 2.22 2.19 2.16 2.37 2.31 Employability 0.11 0.10 0.13 0.12 0.13
Source: Edelweiss Research
Note: Green/red colour indicate increase/decrease in weights in comparison to actual weights highlighted in yellow
BFSI & IT sectors enhance their dominant weights Ten of 20 sectors gain from our six ESG themes
Change in weights based on positive filter 30 33 35 8% 28 4% 21 16 15
(%) 0% 14 10 8 10 7 76 55 7 44 33 33 32 32 32 22 -4% 11 11 11 11 (%)
0 -8% IT
BFSI -12%
Auto
Power
Metals Cement
Logistics -16%
Telecom
IT
Engineering
BFSI
Auto
Oil & Refinery & Oil
Power
Gaspipeline &
FMCG & Retail & FMCG
Metals
Cement
Aviation
Logistics
Telecom
Real Estate/Infra Real
Tobacco/Alcohol
Chemicals
Renewable Power Renewable
Pharma & Hospital & Pharma
FMCGChemicals &
Engineering
Oil & Refinery & Oil
Gas & pipeline Gas Entertainment
Actual weight Weight based on ESG positive filter Retail & FMCG
Real Estate/Infra Real
Tobacco/Alcohol
Renewable Power Renewable
Pharma & Hospital & Pharma FMCG & Chemicals FMCG
Source: Edelweiss Research Source: Edelweiss Research
12 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Shift in weights by stock
After screening through the top 100 stocks for our three ESG filters, we shortlist the top 20 stocks (to increase weight) as well as the laggards. Leaders: Tech Mahindra, Wipro, Dr Reddy, GAIL, L&T Infotech In order to have the highest increase in weight in our ESG Index, each stock has to stand out on all three parameters. IT is one such sector which dominates with Tech Mahindra, Wipro and L&T Infotech as the biggest gainers. Similarly, Dr Reddy’s in the pharma sector and GAIL as a gas sector leader also stand out as the top five gainers.
Overweights – IT sector stands out with Tech Mahindra, Wipro, L&T Infotech in top 5, along with Dr Reddy’s & GAIL
Change in weights based on weighted average of all filters 100% 80% 80% 78% 75% 80% 65% 60% 60% 49% 46% 41% 40% 40% 29% 23% 22% 20% 20% 20% 19% 18% 20% 10% 7%
0%
TCS
Cipla Hero
Airtel
M&M
Wipro
Maruti
Pidilite
Infosys
Marico
Havells
SBI Bank SBI
Dr Reddy Dr
Axis Bank Axis
GAIL India GAIL
Quess Corp Quess
Adani Ports Adani
L&T Infotech L&T Ashok Leyland TechMahindra Source: Edelweiss Research
Laggards: ITC, United Spirits, Bharat Forge, UPL and Hindalco Given our -75% bias towards tobacco, ITC is the second-largest underweight (UW) in our ESG portfolio despite its very high disclosure score. Similarly, United Spirits, due to its presence in the alcohol business, and Bharat Forge, owing to small presence in the defence sector, are weighed down. Both these stocks also have low ESG disclosure scores. Similarly, UPL and Hindalco have low ESG scores.
Underweights – Huge negative bias towards sin stocks heavily weighs down United Spirits, ITC and Bharat Forge
Change in weights based on weighted average of all filters 0% -20% -40% -43% -41% -41% -40% -40% -38% -38% -38% -60% -50% -49% -47% -47% -46% -45% -45% -45% -56% -54% -80% -59% -82%
-100%
ITC
UPL
MRF
GSPL
PLNG
Lupin
Indigop
IpruLife
Siemens
Hindalco
CoalIndia
Tata SteelTata
Bharat forge Bharat
Berger Paints Berger
UnitedSpirits
Eicher Motors Eicher
Bajaj Holdings
Adani Enterprise Adani Motherson Sumi Motherson Muthoot Finance Muthoot Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 13
ESG
Weights for all companies across different filters Weights for all companies across different filters
Revised market cap weights (%) Revised market cap weights (%)
Economic and ESG Actual free Weighted Economic and ESG Actual free Weighted ESG Negative Positive ESG Negative Positive Companies Sector benefits float Mkt avg. of all Companies Sector benefits float Mkt avg. of all disclosure filer filter disclosure filer filter (adj. positive filter) Cap weight filters (adj. positive filter) Cap weight filters
Eicher Motors Ltd Auto No Additional Positives 0.50 0.31 0.43 0.43 0.24 GAIL India Ltd Gas & pipeline Environment 0.51 0.87 0.52 0.55 0.96 Motherson Sumi Systems Ltd Auto No Additional Positives 0.42 0.26 0.36 0.36 0.20 Indraprashta Gas Gas & pipeline Environment 0.20 0.20 0.18 0.22 0.19 Mahindra & Mahindra Ltd Auto No Additional Positives 1.47 2.01 1.27 1.26 1.51 Mahaganagr Gas Limited Gas & pipeline Environment 0.08 0.08 0.07 0.08 0.07 Hero MotoCorp Ltd Auto No Additional Positives 0.86 1.07 0.74 0.73 0.80 Gujarat Gas Limited Gas & pipeline Environment 0.14 0.14 0.12 0.15 0.13 Maruti Suzuki India Ltd Auto No Additional Positives 1.46 1.97 1.27 1.25 1.48 Gujarat State Petronet Gas & pipeline Environment 0.09 0.06 0.08 0.10 0.06 Tata Motors Ltd Auto No Additional Positives 0.81 0.63 0.70 0.69 0.47 Petronet LNG Ltd Gas & pipeline Environment 0.30 0.18 0.26 0.32 0.17 Bajaj Auto Ltd Auto No Additional Positives 0.81 0.63 0.70 0.69 0.48 Infosys Ltd IT Digitisaton 6.65 9.08 7.66 7.10 11.38 MRF Ltd Auto No Additional Positives 0.40 0.26 0.34 0.34 0.20 Wipro Ltd IT Digitisaton 0.86 1.32 0.99 0.92 1.65 Ashok Leyland Ltd Auto No Additional Positives 0.38 0.51 0.33 0.32 0.39 HCL Technologies Ltd IT Digitisaton 1.55 1.38 1.78 1.65 1.73 InterGlobe Aviation Ltd Aviation No Additional Positives 0.25 0.17 0.21 0.26 0.16 Tata Consultancy Services Ltd IT Digitisaton 4.23 5.37 4.88 4.52 6.73 Axis Bank Ltd BFSI Financial Inclusion 3.11 3.73 3.59 3.33 4.68 Larsen & Toubro Infotech Ltd IT Digitisaton 0.25 0.35 0.29 0.27 0.44 Bajaj Finserv Ltd BFSI Financial Inclusion 0.98 0.64 1.13 1.04 0.80 Info Edge India Limited IT Digitisaton 0.55 0.36 0.64 0.59 0.45 Shriram Transport Finance Co Ltd BFSI Financial Inclusion 0.38 0.25 0.44 0.40 0.31 Tech Mahindra Ltd IT Digitisaton 0.88 1.36 1.02 0.94 1.70 SBI Life Insurance Co Ltd BFSI Healthcare 0.49 0.31 0.57 0.52 0.39 State Bank of India BFSI Financial Inclusion 2.53 2.60 2.92 2.71 3.26 Adani Ports & Special Economic Zone Ltd Logistics No Additional Positives 0.63 0.79 0.73 0.54 0.79 Piramal Enterprises Ltd BFSI Financial Inclusion 0.29 0.20 0.33 0.31 0.25 Quess Corp Logistics Employability 0.05 0.05 0.06 0.06 0.06 Housing Development Finance Corp Ltd BFSI Affordable Housing 6.68 4.35 7.70 7.14 5.45 Teamlease Logistics Employability 0.06 0.05 0.06 0.06 0.06 Kotak Mahindra Bank Ltd BFSI Financial Inclusion 3.77 2.41 4.34 4.02 3.02 Container Corp Of India Ltd Logistics No Additional Positives 0.21 0.12 0.25 0.18 0.12 IndusInd Bank Ltd BFSI Financial Inclusion 1.02 1.55 1.18 1.09 1.95 Hindalco Industries Ltd Metals No Additional Positives 0.70 0.59 0.40 0.60 0.30 Bajaj Finance Ltd BFSI Affordable Housing 2.10 1.30 2.43 2.25 1.63 Tata Steel Ltd Metals No Additional Positives 0.69 0.63 0.40 0.59 0.31 ICICI Bank Ltd BFSI Financial Inclusion 6.18 5.22 7.12 6.60 6.54 JSW Steel Ltd Metals No Additional Positives 0.62 0.73 0.35 0.53 0.37 HDFC Life Insurance Co Ltd BFSI Healthcare 0.97 0.53 1.12 1.04 0.67 Vedanta Ltd Metals No Additional Positives 0.54 0.75 0.31 0.46 0.37 ICICI Lombard General Insurance Co Ltd BFSI Healthcare 0.52 0.34 0.60 0.56 0.43 Coal India Ltd Metals No Additional Positives 0.31 0.31 0.18 0.27 0.15 Bandhan Bank Ltd BFSI Financial Inclusion 0.42 0.23 0.49 0.45 0.29 Reliance Industries Ltd Oil & Refinery Digitisaton 8.52 9.44 7.36 9.10 8.87 ICICI Prudential Life Insurance Co Ltd BFSI Healthcare 0.47 0.20 0.54 0.50 0.26 Bharat Petroleum Corp Ltd Oil & Refinery No Additional Positives 0.60 0.87 0.34 0.51 0.44 Muthoot finance Limited BFSI Financial Inclusion 0.23 0.12 0.26 0.24 0.15 Oil & Natural Gas Corp Ltd Oil & Refinery No Additional Positives 0.43 0.58 0.25 0.37 0.29 Bajaj Holdings & Investment Ltd BFSI Affordable Housing 0.29 0.13 0.33 0.31 0.17 Indian Oil Corp Ltd Oil & Refinery No Additional Positives 0.27 0.38 0.16 0.23 0.19 Ambuja Cements Ltd Cement Affordable Housing 0.26 0.44 0.15 0.28 0.28 Hindustan Petroleum Corp Ltd Oil & Refinery No Additional Positives 0.27 0.34 0.16 0.23 0.17 UltraTech Cement Ltd Cement Affordable Housing 1.10 1.66 0.64 1.18 1.04 Sun Pharmaceutical Industries Ltd Pharma & Hospital Healthcare 1.07 0.84 1.23 1.14 1.05 Shree Cement Ltd Cement Affordable Housing 1.22 1.57 0.70 1.30 0.99 Cipla Limited Pharma & Hospital Healthcare 0.62 0.63 0.72 0.66 0.79 Grasim Industries Ltd Cement Affordable Housing 0.71 0.80 0.57 0.76 0.70 Dr Reddy's Laboratories Ltd Pharma & Hospital Healthcare 0.84 1.27 0.96 0.89 1.59 ACC Ltd Cement Affordable Housing 0.23 0.35 0.13 0.25 0.22 Lupin Ltd Pharma & Hospital Healthcare 0.34 0.18 0.40 0.37 0.23 UPL Ltd Chemicals No Additional Positives 0.45 0.35 0.26 0.38 0.18 Biocon Ltd Pharma & Hospital Healthcare 0.25 0.22 0.29 0.27 0.28 Larsen & Toubro Ltd Engineering No Additional Positives 2.28 3.19 1.64 1.95 2.00 Divi's Laboratories Ltd Pharma & Hospital Healthcare 0.69 0.44 0.80 0.74 0.55 Havells India Ltd Engineering No Additional Positives 0.41 0.61 0.36 0.35 0.46 Aurobindo Pharma Ltd Pharma & Hospital Healthcare 0.34 0.19 0.40 0.37 0.24 Bharat forge Engineering No Additional Positives 0.38 0.23 0.27 0.32 0.14 Torrent Pharmaceuticals Limited Pharma & Hospital Healthcare 0.19 0.15 0.22 0.21 0.19 Siemens Ltd Engineering No Additional Positives 0.19 0.13 0.16 0.16 0.10 Apollo Hospitals Pharma & Hospital Healthcare 0.60 0.34 0.70 0.65 0.43 Zee Entertainment Enterprises Ltd Entertainment No Additional Positives 0.26 0.14 0.30 0.28 0.18 NTPC Ltd Power No Additional Positives 0.59 0.73 0.34 0.51 0.36 Asian Paints Ltd FMCG & Chemicals Affordable Housing 2.29 2.02 1.98 2.45 1.90 Power Grid Corp of India Ltd Power No Additional Positives 0.74 0.80 0.43 0.63 0.40 Pidilite Industries Ltd FMCG & Chemicals No Additional Positives 0.38 0.53 0.33 0.32 0.40 Adani Transmission Limited Power No Additional Positives 0.34 0.38 0.19 0.29 0.19 Berger Paints India Limited FMCG & Chemicals Affordable Housing 0.32 0.20 0.27 0.34 0.18 Tata Power Power Environment 0.22 0.20 0.16 0.23 0.16 Marico Ltd FMCG & Retail No Additional Positives 0.31 0.38 0.36 0.27 0.38 Dabur India Ltd FMCG & Retail No Additional Positives 0.72 0.48 0.83 0.62 0.48 DLF Ltd Real Estate/Infra No Additional Positives 0.33 0.35 0.28 0.28 0.26 Titan Co Ltd FMCG & Retail No Additional Positives 0.25 0.19 0.29 0.21 0.19 ADANI ENTERPRISES LTD. Real Estate/Infra No Additional Positives 0.36 0.24 0.31 0.31 0.18 Hindustan Unilever Ltd FMCG & Retail No Additional Positives 2.75 2.19 3.17 2.35 2.20 Adani Green Energy Ltd Renewable Power Environment 0.59 0.40 0.68 0.63 0.50 Godrej Consumer Products Ltd FMCG & Retail No Additional Positives 0.43 0.26 0.50 0.37 0.26 NHPC Ltd Renewable Power Environment 0.10 0.07 0.11 0.10 0.08 Britannia Industries Ltd FMCG & Retail No Additional Positives 0.29 0.21 0.34 0.25 0.21 Bharti Airtel Ltd Telecom No Additional Positives 2.15 2.23 2.48 1.84 2.24 Avenue Supermarts Ltd FMCG & Retail No Additional Positives 1.33 0.86 1.53 1.14 0.86 Vodafone Idea Ltd Telecom No Additional Positives 0.34 0.26 0.39 0.29 0.26 Tata consumer Products Limited FMCG & Retail No Additional Positives 0.64 0.45 0.74 0.55 0.45 Indus Towers Limited Telecom No Additional Positives 0.29 0.24 0.34 0.25 0.24 Jubilant Foodworks Limited FMCG & Retail No Additional Positives 0.33 0.22 0.39 0.29 0.22 United Spirits Ltd Tobacco/Alcohol No Additional Positives 0.26 0.16 0.08 0.22 0.04 Nestle India Limited FMCG & Retail No Additional Positives 0.89 0.63 1.02 0.76 0.63 ITC Ltd Tobacco/Alcohol No Additional Positives 2.33 3.26 0.67 1.99 0.82 Source: Edelweiss Research, Bloomberg Source: Edelweiss Research, Bloomberg
Note: Green/Red colour indicate increase/decrease in weights in Note: Green/Red colour indicate increase/decrease in weights in comparison to actual weights highlighted in yellow comparison to actual weights highlighted in yellow
Base (filter I) Decrease in weight relative to filter I Increase in weight relative to filter I
14 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Our index marries global & India ESG trends
What our ESG India Index captures? Our ESG India Index rebalances the weights of the top 100 stocks by free float market capitalisation, based on three key criteria:
1. Negative/exclusionary filters.
2. ESG disclosure scores of individual companies.
3. Six India-specific ESG themes that we believe will unleash and sustain growth in the long term. Global history of ESG Indices, and their evolution How long have ESG investments been in place? A glance at the launch timeline of ESG indices globally shows that the US and Europe have been at the forefront. For instance, ESG indices in the US were launched in early 1990s—MSCI KLD 400 Social Index in 1990 and several thereafter over the next 15 years. In India, ESG indices debuted only recently in 2012. Six additional indices have been launched since, which suggests the groundwork and the institutional framework for more rapid growth for this asset class is in place.
The initial indices were broad-based with focus on ‘Environmental’ issues. Unsurprisingly the ‘negative screening or exclusionary’ ESG strategy was more popular then. The recent ESG index launches in the US and Europe are based on specific social or governance themes or impact investing. Thematic ESG indices show that the two geographies are ahead of the curve, also indicating an investment shift away from broad-based indices. India, currently in the nascent phase of ESG investing, understandably shows a skew towards broad-based ESG indices. Both globally and in India, ESG indices are still evolving. Why did we zero in on three criteria for creating our India ESG Index? Globally, funds use a combination of ESG investing strategies that can be broken down into seven key screens (refer to figure A). We have chosen to use three of the most popular of these seven filters.
Although nascent in India, ESG investing is maturing globally as funds increasingly adopt more active strategies.
(1) Negative screening is largest strategy: The largest sustainable investment strategy globally continues to be negative or exclusionary screening, with USD19.8tn in assets under management (versus a total of USD30.7tn).
Similarly, we utilise negative screening as one of the three criteria. We have reduced the index weights of companies by their presence in a particular sector.
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 15
ESG
Weights allocated based on negative filter
100% 100% 75% 80%
60% 50%
40% 25% 20%
0%
IT
BFSI
Coal
Auto
Power
Metals
Cement
Defense
Aviation
Logistics
Telecom
Chemicals
Engineering
Oil & Refinery Oil
Gas & pipeline
Entertainment
FMCG & Retail
Real Estate/Infra Real
Tobacco/Alcohol
Renewable Power Renewable Pharma & Hospital Pharma FMCG & Chemicals Source: Edelweiss Research, Bloomberg
(2) ESG integration is the second largest globally, which has grown by a stunning 69% over the past two years, to USD17.5tn in assets. The sharp growth in ESG integration compared to a slowdown in growth (to 31%) for negative screening strategy indicates that funds are increasingly adopting more active strategies.
ESG AUM – Negative and integrated strategies dominate
Source: GSIA, GSIR 2018, USD Bn
Similarly, we integrate the ESG disclosure scores of individual companies and accordingly either increase or decrease weights of companies in the revised ESG Index. Currently we use Bloomberg’s ESG disclosure scores, but shortly we will incorporate our proprietary model for the same.
Bloomberg ESG score is based on the extent of a company's ESG disclosure. The score ranges from 0.1 for companies that disclose a minimum amount of ESG data to 100 for those that disclose every data point collected by Bloomberg. Each data point is weighted in terms of importance, with data such as Greenhouse Gas Emissions carrying greater weight than other disclosures. The score is also tailored to different industry sectors. This way, each company is only evaluated in terms of the data that is relevant to its sector. This score measures the amount of ESG data a company reports publicly and does not measure the company's performance on any data point.
16 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
(3) Six unique India-specific ESG themes In addition to the two universally popular global filters, we shortlist six unique India- specific business opportunities that have direct economic and ESG benefits, and should add quantitatively and sustainably to India’s growth. We have attributed a 125% weight for stocks falling in these themes: 1. Affordable housing: With expansion of shelter for the poor and its 40%-plus growth rates.
2. Employability: Rendering education, employment and minimum work standards.
3. Financial inclusion: With over 300mn people brought into the formal financial system.
4. Healthcare: Through government-led, but private-executed schemes such as Ayushmaan Bharat (National Health Protection Scheme) and Swachh Bharat (Clean India).
5. Digitalisation: Expanding the reach of government and private services to the last individual.
6. Environment: Whereof India is taking the lead globally to clean-up and hold emissions.
We also believe these six filters should progressively expand ESG definitions and qualify for higher capital pools, and will generate superior economic and market returns for businesses and investors.
For further details refer to detailed report India 2025 - Seeking Growth The ESG Way
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ESG
18 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
GSIA’S DEFINITIONS OF SUSTAINABLE INVESTMENT As per GSIR 2018 report, GSIA defines sustainable investing as an approach that relies on ESG screening in portfolio selection.
1. Negative/exclusionary screening: It involves steering clear of sectors, companies or practices based on certain ESG criteria.
2. Positive/best-in-class screening: It advocates investments in sectors, companies or projects with positive ESG performance.
3. Norms-based screening: Screens investments based on minimal standards of business practices.
4. ESG integration: Systematic and explicit inclusion of environmental, social and governance factors into financial analysis by investment managers.
5. Sustainability theme investing: Investment in specific themes or assets related to sustainability.
6. Impact/community investing: Aimed at solving social or environmental problems by directing capital towards underserved individuals or communities.
7. Corporate engagement, shareholder action: Favours companies whose strategies are susceptible to investor activism via direct corporate engagement, proxy voting based on ESG guidelines, etc.
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 19
ESG
Sector Insights
BFSI: Derived weights fall on poor ESG disclosure scores Free float market cap weight (30.4%) narrows marginally by 20bps to 30.2% despite applying positive filters with weightage of 125%. This is largely attributable to poor Weighted Average ESG disclosure score of the sector which is estimated at ~30 (range 17-58). We apply 125% weights across all positive filters such as financial inclusion (banks), healthcare (insurance) and affordable housing (financing).
Free float market cap weight of BFSI sector Derived weights of constituents based on all filters
40.0 35.1 7.2 6.5 32.5 30.4 30.2 6.0 5.4 30.0 24.1 4.7 4.8 20.0 (%) 3.6 3.3
(%) 3.0
10.0 2.4 1.6 1.2 0.8 0.7 0.4 0.3 0.3 0.0 0.3 0.3 0.2 0.1
0.0
HDFC
SBI LifeSBI
Piramal
Ipru Life
SBI Bank SBI
filters
Axis Bank Axis
HDFC LifeHDFC
Positive filter Positive
Negative filer Negative
ICICI Bank
ESG disclosureESG
Kotak Bank
Cap weight Cap
Bajaj Finserv
Bajaj Finance
ICICI Lombard
Bajaj Holdings
Bandhan Bank
Weighted avg. of all avg. of Weighted
Muthoot finance Muthoot Sr. Transport Fin. Sr. Transport Actual free float Mkt Actual free Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in weights based on all filters
25% 20% 55% 50% 3% 29% 10% 33% -5% 6% 11%
-20% (%) (%) -16% -11% -35% -31% -34% -14%-17% -18% -35%-35% -36% -18% -20% -23% -45% -33% -50% -45% -31%-34% -54%
-65% -57% -55% -46%
HDFC
HDFC
SBI LifeSBI
Piramal
SBI Life SBI
Piramal
Ipru Life
SBI Bank SBI
Ipru Life
SBI Bank SBI
Axis BankAxis
HDFC Life HDFC
ICICI Bank
Axis BankAxis
HDFC LifeHDFC
ICICI Bank
Kotak Bank
Kotak Bank
Muthoot FinMuthoot
Bajaj Finserv
Muthoot FinMuthoot
Bajaj Finserv
Bajaj Holding
Bajaj Finance
Bajaj Holding
Bajaj Finance
ICICI Lombard
Bandhan Bank Bandhan
ICICI Lombard
Bandhan Bank Bandhan Sr. Transport Fin. Sr. Transport Fin. Sr. Transport Source: Edelweiss Research, Bloomberg Source: Edelweiss Research.
20 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
IT: High ESG disclosure & positive filter enhance derived weights Free float market cap weight (15%) increases significantly by ~900bps to 24% (post applying all filters), largely due to high ESG disclosure score & impact of positive filter (digitisation: 125% weight). Weighted Average ESG disclosure score of the sector (estimated at ~49; range 25-59) is 28% higher than average ESG disclosure score of our index which is 38 (estimated). HCL Technologies and Info Edge, however, have poor ESG disclosure scores of 34 and 25, respectively.
Free float market cap weight of IT sector Derived weights of constituents based on all filters
24.1 12.0 11.4 25.0 19.2 10.0 20.0 17.2 15.0 16.0 15.0 8.0 6.7
(%) 6.0
10.0 (%) 5.0 4.0 1.7 1.7 1.7 0.0 2.0 0.4 0.4
0.0
TCS
Wipro
Infosys
filters
Positive filter Positive
Negative filer Negative
L&T Info. L&T
ESG disclosure ESG
Info Edge Info
HCL Tech. HCL
Cap weight
Weighted avg. of all avg. of Weighted Tech Mahindra Tech Actual float free Mkt Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in weights based on all filters
60% 54% 54% 100% 93% 93% 41% 77% 71% 40% 37% 76% 27% 59%
20% 52%
(%) (%) 0% 28% 12% -20% -11% 4%
-40% -35% -20% -19%
TCS TCS
Wipro Wipro
Infosys Infosys
InfoEdge InfoEdge
HCL Tech. HCL HCL Tech. HCL
L&T Infotech L&T L&T Infotech L&T Tech Mahindra Tech TechMahindra Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 21
ESG
Oil & refinery: Reliance (RIL) & strong disclosures provide support Our derived weight of 10% remains flat in comparison to actual free float market cap weight despite the sector falling under negative filter (50% weight). This is largely attributed to RIL (derived weight 9%, up 400bps from actual) as we apply positive filter “digitisation” with weightage of 125%. Besides, weighted average ESG disclosure score of the sector remains high at 44 (15% higher versus score of index).
Free float market cap weight of the sector Derived weights of constituents based on all filters
12.0 11.6 10.0 10.1 10.4 10.0 8.9 10.0 8.3 8.0 8.0
(%) 6.0 6.0
4.0 (%) 4.0 2.0 2.0 0.4 0.2 0.3 0.2
0.0
filters
Positive filter Positive
Negative filer Negative
ESG disclosureESG
Cap weight Cap
IOCL
BPCL
HPCL
ONGC
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free Reliance Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in weights based on all filters
50% 10% 46% 4% 40% 40% 35% 0%
30% -10%
26%
(%) (%) 20% -20%
11% 10% -30% -27% -30% -32%
0% -40% -37%
IOCL
IOCL
BPCL
BPCL
HPCL
HPCL
ONGC
ONGC Reliance Reliance Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
22 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
FMCG & retail: Poor ESG disclosure score weighs down Our derived weight has declined meaningfully by ~200bps (absolute) to 6% versus 8% (actual free float market cap weight) largely on account of poor disclosure score of 28 (vs. index score:38). Of all the 10 companies considered in the sector, Marico’s disclosure score remains high at 46, while remaining 9 have ESG score of <=30.
Free float market cap weight of the sector Derived weights of constituents based on all filters
10.0 9.2 2.5 8.0 2.2 8.0 6.8 5.9 5.9 2.0 6.0 1.5 (%) 4.0 (%) 1.0 0.9 2.0 0.6 0.5 0.4 0.4 0.0 0.5 0.3 0.2 0.2 0.2
0.0
HUL
Titan
Dabur
Nestle
Marico
filters
Positive filter Positive
Negative filer Negative
ESG disclosureESG
Britannia
Cap weight Cap
Jubilant Foods
Weighted avg. of all avg. of Weighted
Tata Consumer Tata Actual free float Mkt Actual free
Godrej Consumer Avenue Supermart Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in weights based on all filters
20% 19% 25% 20%
6% 10%
-8% -5%
(%) (%) -22% -20% -20% -24% -20% -23% -36% -29% -29% -30% -35% -33% -33% -35% -29%-29%-30% -39% -33%-33%-35% -39% -50%
-50%
HUL
Titan
HUL
Dabur
Nestle
Titan
Marico
Dabur
Nestle
Marico
Britannia
Britannia
Avenue Sup.
Avenue Sup.
Jubilant Foods
Tata Consumer Tata
Jubilant Foods
Tata ConsumerTata Godrej Consumer
Godrej Consumer Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 23
ESG
Autos: Negative filter reduces weight despite modest disclosures Our derived weight reduces ~130bps (absolute) to 5.8% versus 7.1% (actual free float market cap weight) despite better ESG disclosure score of 41 (vs. index: 38), primarily due to the impact of negative filter weightage of 75%. While M&M, Maruti and Ashok Leyland remain leaders with ESG disclosure of >50, Eicher Motors, Motherson Sumi and MRF are laggards with ESG disclosure score of <=26.
Free float market cap weight of the sector Derived weights of constituents based on all filters
8.0 7.7 1.6 1.5 1.5 7.1 7.0 6.1 6.1 1.2 5.8 6.0 0.8
(%) 0.8 5.0 (%) 0.5 0.5 0.4 4.0 0.4 0.2 0.2 0.2 3.0
0.0
MRF
Hero
M&M
Eicher
Maruti
Bajaj Auto
filters
Positive filter Positive
Negative filer Negative
Tatamotors
ESG disclosureESG
Cap weight Cap
Ashok Leyland
Motherson SumiMotherson Weighted avg. of all avg. of Weighted
Actual free float Mkt Actual free
Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
40% 37% 36% 34% 5% 3% 2% 1% 25% -5% 20% -6% -15% -25%
0% (%) (%) -35% -20% -45% -41% -21% -23% -42% -50% -33% -55% -53% -53%
-40% -38% -38%
MRF
Hero
M&M
MRF
Hero
Maruti
M&M
Maruti
Bajaj Auto
Bajaj Auto
Tata Motors Tata
Tata MotorsTata
Eicher MotorsEicher
Ashok Leyland
Eicher MotorsEicher
Ashok Leyland Motherson Sumi
Motherson Sumi Motherson Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
24 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Pharma & hospitals: Beneficiary of positive filter (healthcare) Positive filter of “healthcare” lifts our derived weights by 40bps (absolute) to 5.3% versus 4.9% (actual weight) despite poor ESG disclosure score of 33 (15% below Index score). Of nine companies in the basket, Dr Reddy’s tops the list with ESG disclosure score of 58, followed by Cipla (ESG score: 39) within the overall index. Rest are in the 21-30 range (index weighted average score is 38).
Free float market cap weight of the sector Derived weights of constituents based on all filters
5.7 6.0 5.3 5.3 2.0 4.9 1.6 5.0 4.3 1.6 4.0 1.2 1.0 (%) 0.8 3.0 (%) 0.8 0.5 2.0 0.4 0.4 0.3 0.2 0.2 0.2 1.0
0.0
Cipla
Lupin
Biocon
Dr Reddy Dr
Divi's LabDivi's
filters
Positive filter Positive
Negative filer Negative
ESG disclosureESG
Sun Pharma
Cap weight Cap
Torrent Pharms Torrent
Apollo Hospitals Apollo
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free Aurobindo Pharma Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
55% 52% 100% 90%
34% 72%
13% 2% 44% 28%
(%) (%) 12% -8% 16% -11% -29% -21% -21% -12% -2% -2% -37% -20% -29%
-50% -43% -45% -47% -40% -31% -34%
Cipla Cipla
Lupin Lupin
Biocon Biocon
Divi's LabDivi's Divi's Lab Divi's
Dr. Reddy Dr. Dr. Reddy Dr.
Aurobindo Aurobindo
Sun Pharma Sun Pharma
Torrent Pharma Torrent Torrent Pharma Torrent Apollo Hospitals Apollo Hospitals Apollo Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 25
ESG
Cement: Negative filter drags weights despite highest ESG score Cement sector has the highest ESG disclosure score of 53 within our index (37% higher than index). Except Grasim, all companies in the basket have ESG score =>50 (Ambuja is the leader with 65). That said, negative filter weightage of 50% drags derived weights to 3.2% (3.5% actual weight).
Free float market cap weight of the sector Derived weights of constituents based on all filters
5.0 4.8 1.2 1.0 1.0 3.8 4.0 3.5 3.2 1.0 3.0 0.7 2.2 0.7
(%) 2.0 (%) 0.5 1.0 0.3 0.2 0.0 0.2
0.0
ACC
filters
Positive filter Positive
Negative filer Negative
Grasim
Ambuja
ESG disclosure ESG
Cap weight Cap
Ultra Tech
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free Shree Cement Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
75% 69% 8% 6%
60% 52% 51% 1%
45% -1% -6% (%) (%) -5% 30% 29% -6% -13% 15% 13%
0% -20% -19%
ACC
ACC
Grasim
Grasim
Ambuja Ambuja
UltraTech
UltraTech Shrre Cement Shrre Cement Source: Edelweiss Research Source: Edelweiss Research, Bloomberg
26 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Engineering: L&T drives down derived weights on negative filter Negative filter weightage of 75% drags overall weight to 2.7% (60bps lower versus actual weight of 3.3%) despite 27% higher ESG score (49) in comparison to index (average disclosure score: 38). We apply negative filter weightage of 63% to L&T given its presence in the “defence” sector, thereby reducing its weight 30bps to 2%.
Free float market cap weight of the sector Derived weights of constituents based on all filters
5.0 2.5 4.2 4.0 2.0 3.3 2.0 2.8 2.7 3.0 2.4
(%) 1.5
2.0 (%) 1.0 1.0 0.5 0.0 0.5 0.1 0.1
0.0
L&T
filters
Positive filter Positive
Negative filer Negative
ESG disclosure ESG
Havells
Cap weight Cap
Siemens
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free forge Bharat Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
46% 10% 50% 40% 10%
30% -5%
10% -20% -12%
(%) (%) -10% -35%
-30% -50% -29% -47% -40%
-50% -65% -62%
L&T L&T
Havells Havells
Siemens Siemens
Bharat forge Bharat forge Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 27
ESG
FMCG & chemicals: Poor ESG score & negative filters offset positive Derived weights reduce 50bps to 2.5% (3.5% actual) on poor ESG score (except Pidilite) coupled with negative filter weightage of 75% falling under chemical sector. However, we categorise Asian Paints and Berger Paints into one of our positive filters “affordable housing” with weightage of 125%. On the contrary, Pidilite’s weight increases 5% on high ESG disclosure score of 54; however, it’s insufficient to drive overall sector weight given low weight in the basket.
Free float market cap weight of the sector Derived weights of constituents based on all filters
1.90 3.5 3.0 3.1 2.0 2.7 2.8 2.6 2.5 1.6 2.1
(%) 1.2
1.4 (%) 0.7 0.8 0.40 0.0 0.4 0.18
0.0
filters
Positive filter Positive
Negative filer Negative
Pidilite
ESG disclosure ESG
Cap weight Cap
Asian paints Asian
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free Paints Berger Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
50% 40% 10% 5%
30% -1%
10% -12%
(%) (%) -10% -23% -17% -12% -30% -34% -38%
-50% -45% -41%
Pidilite Pidilite
Asian paints Asian Asian paints Asian Berger Paints Berger Paints Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
28 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Metals: Negative filter remains a drag on overall weights Weight reduces 140bps to 1.5% versus actual weight of 2.9% largely due to negative filter weightage of 50% offset by relative better ESG disclosure score. Weighted average disclosure score ranges between 33 (Hindalco) and 53 (Vedanta).
Free float market cap weight of the sector Derived weights of constituents based on all filters
3.5 0.5 2.9 3.0 2.8 2.4 0.4 0.4 0.4 2.1 1.6 1.5 0.3 0.3 (%) 1.4 0.3
0.7 (%) 0.2 0.2 0.0 0.1
0.0
filters
Positive filter Positive
Negative filer Negative
ESG disclosure ESG
Cap weight Cap
Vedanta
Hindalco
Weighted avg. of all avg. of Weighted
JSW Steel JSW
Coal India Tata Steel Tata Actual free float Mkt Actual free Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
40% 39% 0%
28% -12% 19%
16% -24%
(%) (%) 4% -36% -30%
-40% -8% -2% -48% -10% -51%
-20% -15% -60% -55% -57%
Vedanta Vedanta
Hindalco Hindalco
JSW Steel JSW Steel
Coal India Coal India Tata Steel Tata Steel Tata Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 29
ESG
Telecom: Marginal decline in weights on marginally poor ESG score Overall weight of the sector dips marginally by 10bps to 2.7% on account of marginally poor ESG score of 37.7 (index score of 38.4). Airtel anchors the sector with relative better ESG disclosure score of 40.
Free float market cap weight of the sector Derived weights of constituents based on all filters
3.2 3.5 2.5 2.2 2.8 2.7 2.7 2.8 2.4 2.0 2.1
(%) 1.5
1.4 (%) 0.7 1.0
0.0 0.5 0.3 0.2
0.0
filters
Airtel
Positive filter Positive
Negative filer Negative
ESG disclosure ESG
Cap weight Cap
Vodafone
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free TowersIndus Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
5% 4% 5% 4%
-2% -2%
-9% -9%
(%) (%) -16% -16%
-18% -18% -23% -23% -25% -25%
-30% -30%
Airtel Airtel
Vodafone Vodafone
IndusTowers IndusTowers Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
30 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Tobacco/alcohol: Largest negative filter outweighs high disclosure We apply lowest negative filter score of 25% to this sector, which eventually drags overall weight to 0.9% (170bps lower than actual). However, disclosure of 51 (32% higher than index) seems paradoxical given the nature of business.
Free float market cap weight of the sector Derived weights of constituents based on all filters
3.5 3.4 1.0 0.82 2.8 2.6 2.2 0.8 2.1
(%) 0.6 1.4 0.9 0.7 (%) 0.7 0.4
0.0 0.2 0.04
0.0
ITC
filters
Positive filter Positive
Negative filer Negative
ESG disclosure ESG
Cap weight Cap
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free United Spirits Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
50% 40% 0%
30% -20%
10% -40%
(%) (%) -10% -60% -65% -30% -80% -85%
-50% -39% -100%
ITC ITC
United Spirits United Spirits Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 31
ESG
Coal-based power: Negative filter offsets healthy disclosure score We apply negative filter weightage of 50% for the coal-based power sector, thereby reducing overall weights by 80bps to 1.1% (actual weight: 1.9%) despite higher ESG score of 43 (12% higher than index).
Free float market cap weight of the sector Derived weights of constituents based on all filters
2.5 0.6 0.6 2.1 1.9 2.0 0.5 1.7 0.4 1.5 0.3 1.1 1.1 0.4
(%) 0.2 1.0 (%) 0.2
0.5 0.1 0.0
0.0
NTPC
Power Grid Power
Tata Power Tata
filters
Positive filter Positive
Negative filer Negative
ESG disclosure ESG
Cap weight Cap
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free Transmission Adani Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
25% 23% 0%
17% 14% -10% 9% 9% -20%
(%) 1% (%) -30% -29% -7% -40% -39%
-15% -10% -50% -43% -46%
NTPC
NTPC
Power Grid Power
Power Grid Power
Tata PowerTata
Tata PowerTata Adani Transmission Adani Adani Transmission Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
32 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Gas & pipeline: GAIL drives the sector Overall sector weight increases 30bps to 1.6% on account of significantly higher ESG score of GAIL (66 versus index score of 38) partially offset by negative filter weightage of 75%, but enhanced by our positive 125% for the “Environmentally” friendly sector. The other five companies in the basket have ESG score ranging between 23 and 38.
Free float market cap weight of the sector Derived weights of constituents based on all filters
2.0 1.0 1.0 1.5 1.6 1.6 1.3 1.4 1.2 0.8
1.2 (%) 0.8 0.6
0.4 (%) 0.4 0.0 0.2 0.2 0.2 0.1
0.1 0.1
filters
Positive filter Positive Negative filer Negative
ESG disclosure ESG 0.0
Cap weight
IGL
GGL
GAIL
MGL
Weighted avg. of all avg. of Weighted
GSPL PLNG Actual float free Mkt Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
71% 100% 75% 87%
70% 50%
25% 40%
(%) (%) 0% 10% -1% -1% -1% -25% -20% -7% -7% -7% -33% -37%
-50% -40% -50% -43%
IGL IGL
GGL GGL
GAIL GAIL
MGL MGL
GSPL GSPL PLNG PLNG Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 33
ESG
Logistics: Employability factor maintains the weight Overall derived weight remains flat at 1% versus actual as we apply positive filter “employability” weightage of 125%. Overall disclosure score of the sector remains marginally better than the index (5% higher than index). CCI remains a laggard in the basket with poor ESG disclosure score of 22, which reduces its overall weight by 44%.
Free float market cap weight of the sector Derived weights of constituents based on all filters
1.5 0.9 0.79 1.1 1.2 1.0 1.0 1.0 0.7 0.8 0.9
(%) 0.5
0.6 (%) 0.3 0.4 0.0 0.2 0.12 0.06 0.06
0.0
CCI
filters
Positive filter Positive
Negative filer Negative
ESG disclosure ESG
Cap weight Cap
Weighted avg. of all avg. of Weighted
Teamlease
Quess Corp Actual free float Mkt Actual free Ports Adani Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
50% 30% 25% 14% 14% 30% 25% 14%
10% -2%
(%) (%) -10% -18% -9% -9% -30% -34%
-50% -44% -50% -44%
CCI CCI
Teamlease Teamlease
Quess Corp Quess Quess Corp Quess Adani Ports Adani Ports Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
34 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
Renewable power: Derived weight reduces owing to poor ESG score Poor ESG score of 26 (32% lower than index score) led to 15% (relative) decline in derived weights to 0.6% (0.7% actual) despite positive filter “environment” weightage of 125%.
Free float market cap weight of the sector Derived weights of constituents based on all filters
1.0 0.6 0.8 0.5 0.8 0.7 0.7 0.5 0.6 0.6 0.5
(%) 0.4
0.4 (%) 0.2 0.2
0.0 0.1 0.1
0.0
filters
Positive filter Positive
Negative filer Negative
NHPC
ESG disclosure ESG
Cap weight Cap
Weighted avg. of all avg. of Weighted Actual free float Mkt Actual free GreenAdani Source: Edelweiss Research Source: Edelweiss Research Change in weights based on ESG disclosure Change in in weights based on all filters
0% 0%
-7% -3% -6% -14%
-9%
(%) (%) -21% -12%
-28% -15% -15% -15%
-35% -32% -32% -18%
NHPC NHPC
Adani Green Adani Green Source: Edelweiss Research, Bloomberg Source: Edelweiss Research
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited 35
ESG
Appendix
Disclosure scores of all companies in the basket Disclosure scores of all companies in the basket
Disclsoure score Disclsoure score
Environment Social Governance Environment Social Governance Companies Sector ESG Companies Sector ESG (E) (S) (G) (E) (S) (G)
Eicher Motors Ltd Auto 13.2 28.1 44.6 24.0 GAIL India Ltd Gas & pipeline 51.2 89.1 69.6 65.6 Motherson Sumi Systems Ltd Auto 11.6 28.1 48.2 24.0 Indraprashta Gas Gas & pipeline 32.6 32.6 32.6 38.1 Mahindra & Mahindra Ltd Auto 48.8 54.4 58.9 52.5 Mahaganagr Gas Limited Gas & pipeline 32.6 61.2 57.1 38.1 Hero MotoCorp Ltd Auto 47.3 33.3 64.3 47.9 Gujarat Gas Limited Gas & pipeline 32.6 32.6 32.6 38.1 51.9 43.9 58.9 51.7 Maruti Suzuki India Ltd Auto Gujarat State Petronet Gas & pipeline 14.0 33.3 44.6 25.6 18.6 24.6 60.7 29.8 Tata Motors Ltd Auto Petronet LNG Ltd Gas & pipeline 13.2 24.6 44.6 23.1 Bajaj Auto Ltd Auto 17.1 42.1 48.2 30.2 Infosys Ltd IT 44.2 64.9 58.9 52.5 MRF Ltd Auto 12.4 33.3 48.2 25.6 Wipro Ltd IT 58.1 57.9 62.5 59.1 Ashok Leyland Ltd Auto 50.4 49.1 58.9 52.1 HCL Technologies Ltd IT 17.8 54.4 51.8 34.3 InterGlobe Aviation Ltd Aviation 10.9 38.6 48.2 26.0 Tata Consultancy Services Ltd IT 38.8 56.1 64.3 48.8 Axis Bank Ltd BFSI 38.4 50.0 57.1 46.1 Larsen & Toubro Infotech Ltd IT 48.1 57.9 64.3 54.1 Bajaj Finserv Ltd BFSI 7.1 36.7 48.2 25.0 Info Edge India Limited IT 9.3 33.3 51.8 24.8 Shriram Transport Finance Co Ltd BFSI 4.5 40.0 51.8 25.4 Tech Mahindra Ltd IT 48.8 73.7 67.9 59.1 SBI Life Insurance Co Ltd BFSI 7.1 38.3 42.9 24.1 Adani Ports & Special Economic Zone Ltd Logistics 41.1 52.6 58.9 47.9 State Bank of India BFSI 28.6 41.7 58.9 39.5 Quess Corp Logistics 25.6 41.1 54.6 34.9 Piramal Enterprises Ltd BFSI 13.2 38.6 44.6 26.4 Teamlease Logistics 25.6 41.1 54.6 34.9 Housing Development Finance Corp Ltd BFSI 13.4 21.7 51.8 25.0 2.3 38.6 48.2 21.5 Kotak Mahindra Bank Ltd BFSI 8.0 30.0 51.8 24.6 Container Corp Of India Ltd Logistics IndusInd Bank Ltd BFSI 47.3 70.0 67.9 58.3 Hindalco Industries Ltd Metals 20.9 28.1 64.3 32.6 Bajaj Finance Ltd BFSI 4.5 33.3 51.8 23.7 Tata Steel Ltd Metals 25.6 28.1 62.5 34.7 ICICI Bank Ltd BFSI 25.9 26.7 51.8 32.5 JSW Steel Ltd Metals 36.4 49.1 64.3 45.9 HDFC Life Insurance Co Ltd BFSI 2.7 26.7 51.8 21.1 Vedanta Ltd Metals 45.7 54.4 69.6 53.3 ICICI Lombard General Insurance Co Ltd BFSI 9.8 31.7 48.2 25.0 Coal India Ltd Metals 22.5 54.4 55.4 37.6 Bandhan Bank Ltd BFSI 4.5 26.7 48.2 21.1 Reliance Industries Ltd Oil & Refinery 39.5 28.1 64.3 42.6 ICICI Prudential Life Insurance Co Ltd BFSI 2.7 18.3 42.9 16.7 Bharat Petroleum Corp Ltd Oil & Refinery 52.9 59.4 58.9 56.0 Muthoot finance Limited BFSI 7.1 21.7 44.6 20.2 Oil & Natural Gas Corp Ltd Oil & Refinery 45.5 57.8 58.9 51.9 Bajaj Holdings & Investment Ltd BFSI 2.7 13.3 51.8 17.5 Indian Oil Corp Ltd Oil & Refinery 51.9 54.4 57.1 53.7 Ambuja Cements Ltd Cement 65.9 54.4 73.2 64.9 Hindustan Petroleum Corp Ltd Oil & Refinery 41.1 54.4 58.9 48.3 UltraTech Cement Ltd Cement 56.6 59.6 58.9 57.9 Sun Pharmaceutical Industries Ltd Pharma & Hospital 23.3 28.1 48.2 30.2 Shree Cement Ltd Cement 41.9 52.6 64.3 49.6 Cipla Limited Pharma & Hospital 29.5 42.1 58.9 39.3 Grasim Industries Ltd Cement 41.1 33.3 58.9 43.4 Dr Reddy's Laboratories Ltd Pharma & Hospital 51.2 64.9 67.9 58.3 ACC Ltd Cement 54.3 66.7 58.9 58.3 Lupin Ltd Pharma & Hospital 4.7 28.1 48.2 20.2 UPL Ltd Chemicals 14.0 33.3 64.3 30.2 Biocon Ltd Pharma & Hospital 24.8 42.1 48.2 34.3 Larsen & Toubro Ltd Engineering 45.0 56.1 71.4 53.7 Divi's Laboratories Ltd Pharma & Hospital 10.1 33.3 48.2 24.4 Havells India Ltd Engineering 54.3 57.9 58.9 56.2 Aurobindo Pharma Ltd Pharma & Hospital 4.7 28.1 51.8 21.1 Bharat forge Engineering 14.0 22.8 44.6 23.1 Torrent Pharmaceuticals Limited Pharma & Hospital 16.3 38.6 53.6 30.2 11.6 42.1 48.2 27.3 Siemens Ltd Engineering Apollo Hospitals Pharma & Hospital 7.0 33.3 44.6 21.9 Zee Entertainment Enterprises Ltd Entertainment 4.7 33.3 44.6 20.7 NTPC Ltd Power 37.2 49.1 67.9 47.1 Asian Paints Ltd FMCG & Chemicals 23.3 43.9 48.2 33.9 Power Grid Corp of India Ltd Power 26.4 50.9 67.9 41.7 Pidilite Industries Ltd FMCG & Chemicals 48.8 59.6 58.9 53.7 Adani Transmission Limited Power 35.7 43.9 62.5 43.8 Berger Paints India Limited FMCG & Chemicals 10.1 28.1 51.8 24.0 Tata Power Power 18.6 49.1 57.1 34.7 Marico Ltd FMCG & Retail 37.2 47.4 64.3 45.9 DLF Ltd Real Estate/Infra 31.0 49.1 53.6 40.5 Dabur India Ltd FMCG & Retail 16.3 24.6 48.2 25.6 ADANI ENTERPRISES LTD. Real Estate/Infra 7.0 43.9 51.8 26.0 Titan Co Ltd FMCG & Retail 18.6 38.6 44.6 29.3 Adani Green Energy Ltd Renewable Power 13.2 33.3 48.2 26.0 Hindustan Unilever Ltd FMCG & Retail 16.3 33.3 60.7 30.6 NHPC Ltd Renewable Power 13.2 33.3 48.2 26.0 Godrej Consumer Products Ltd FMCG & Retail 14.7 19.3 48.2 23.6 Bharti Airtel Ltd Telecom 26.8 40.6 67.9 39.9 Britannia Industries Ltd FMCG & Retail 16.3 28.1 51.8 27.3 Vodafone Idea Ltd Telecom 12.2 39.1 53.6 28.8 Avenue Supermarts Ltd FMCG & Retail 13.2 28.1 48.2 24.8 14.7 52.6 48.2 31.4 Tata consumer Products Limited FMCG & Retail 12.4 38.6 48.2 26.9 Indus Towers Limited Telecom 15.5 17.5 48.2 23.6 Jubilant Foodworks Limited FMCG & Retail 12.4 33.3 48.2 25.6 United Spirits Ltd Tobacco/Alcohol Nestle India Limited FMCG & Retail 17.8 28.1 48.2 27.3 ITC Ltd Tobacco/Alcohol 49.6 54.4 62.5 53.7 Source: Bloomberg, Edelweiss Research Source: Bloomberg, Edelweiss Research
36 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
ESG
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Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk. Research analyst has served as an officer, director or employee of subject Company: No ESL has financial interest in the subject companies: No ESL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report. Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No ESL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No Subject company may have been client during twelve months preceding the date of distribution of the research report. There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to their charges of non registration as a broker dealer. A graph of daily closing prices of the securities is also available at www.nseindia.com Analyst Certification: The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
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ESG
Additional Disclaimers
Disclaimer for U.S. Persons This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc.
Disclaimer for U.K. Persons The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA").
In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”).
This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person.
Disclaimer for Canadian Persons This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.
This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person.
ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.
Disclaimer for Singapore Persons In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.
Disclaimer for Hong Kong persons This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so.
Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.
Aditya Narain Head of Research [email protected]
38 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited