The Securities and Exchange Board of India’s (SEBI) proposed Business Responsibility and Sustainability Report (BRSR) calls for 1,000 listed companies to "disclose their material Environmental, Social, and Governance (ESG) risks and opportunities, their approach to mitigating the risks or adapting to them, and the financial implications involved in this process." BRSR, which requires robust information relating to social metrics apart from audited data about employees, communities, and consumers, is also meant to increase the transparency of corporate disclosures and help companies examine sustainability-related risks and opportunities. It is also meant to be more robust, covering a broader spectrum as compared to other ESG reporting frameworks.

And yet, ironically, we find no mention of nature anywhere in the draft report, even if we are among the top rankers in the world on pollution and biodiversity loss metrics.

Sir Partha Dasgupta of the University of Cambridge calls nature a “blind spot” in economics and warns: “We can no longer afford for it to be absent from accounting systems that dictate national finances or ignored by economic decision-makers.” The Stern Review on the Economics of Climate Change is even starker: “Climate change could lead to the greatest market failure ever.”

Regulators, more than politicians and business leaders, therefore, must realise that “the economy is a wholly-owned subsidiary of the environment.” This message does not come through the BRSR.

After China and the US, India is the most vulnerable country to physical climate risk. A recently released report by the Cross Dependency Initiative (XDI)—the Platform, which brings together asset-level data sets with extensive climate models to provide deep analysis of an organisation’s exposure—alludes to Gross Domestic Climate Risk.

Ranking over 2,600 jurisdictions around the world, it lists 14 Indian states among the top 100 most climate-risk-prone territories in the world in 2050. This is based on modelled projections of damage to the environment from extreme weather and climate change, including from flooding, forest fires, and sea level rise.

The XDI findings from the XDI Gross Domestic Climate Risk ranking underscore the importance of pricing physical climate risk in financial markets, given the amount of capital investment represented by the assets at risk in the provinces identified, the vulnerability of global supply chains, and the need for climate resilience to inform investment. For the first time, it has become possible for the finance industry to directly compare Mumbai, New York, and Berlin using a like-for-like methodology.

The 2005 floods and the recent pandemic vividly demonstrate how a disabled Mumbai impacts the national economy. Author Amitav Ghosh, among others, has from time to time highlighted some scenarios exposing the megapolis’s vulnerabilities, including the increased frequency and severity of cyclonic activity on the west coast.

In their report, ShareAction, a charity that promotes responsible investing, ranks the responsible investment policies and practices of 77 of the world’s largest asset managers. They “assess the ambition, scope, and transparency of these firms' approaches to responsible investment to help determine how far they are safeguarding against key social and environmental risks”. While all money pipelines converge—be they banks, insurers, or asset managers—they need to be laid anew in a sustainable direction.

How do corporate India’s actions tie into the country’s net-zero commitment of 2070 unless all those concerned work towards steering it in that direction? Some broad challenges stand out, fragmented regulatory architecture being one of them. While SEBI appears ready to champion ESG, others like the RBI, IRDAI, and PFRDA are at varying stages of waking up to this fundamental reality. Given the paucity of time, regulators cannot fritter away energies in intra-regulatory turf wars. After all, the Unit Linked Insurance Plan (ULIP) put the SEBI and IRDAI on a collision course not too long ago. Despite the government’s concerns about safeguarding pension money, one of the top preferred allocations by many National Pension Scheme (NPS) managers ends up with the fossil fuel industry. Does the BRSR address these challenges? Alas, no!

And finally, can climate change issues be merely left for auditors to certify? That brings us to the matter of greenwashing. Who measures it, how, and who calls out any greenwashing attempts? Professor Alison Taylor of NYU Stern School of Business says, “The problem with treating climate change as an auditing task is that you end up with a bunch of auditors signing off on destruction, placing mindless faith in certification schemes, and not knowing basic stakeholder engagement approaches that are supposed to be at the centre of this whole sustainability thing... The reality is that ESG exists because investors, citizens, customers, suppliers, and employees want businesses to be more responsible about their impacts. It is simple; it’s a change from older ideas, and it is definitely about ethics”.

What the BRSR needs to do is put nature at its very core, build a unified regulatory architecture to deal with the ESG rollout, maintain the integrity of this process, thereby ensuring a greenwash-free environment, and use a good big stick whenever necessary. All this may sound like a tall order. And yet, if we are serious about staying within the planetary boundaries, do we have a choice? Even though ethics like nature bear no mention in the BRSR brief, one can only hope that after receiving many inputs (including from the first author of this article), SEBI would take heed. The core issue here is not procedural or wordsmithing, but substantive. Faced with a serious existential climate crisis, how do we rejig our businesses with a single-minded urgency? This is not about making our balance sheets resilient enough to face a crisis of our own making. It is also about balance sheets that account for externalities when pricing their wares. Double materiality in letter and spirit. How else do we ensure sustainability for the coming seven generations?

This article was originally published in Deccan Herald. Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.