Issues related to ESG new parameters for institutional investors: Morgan Stanley

MUMBAI: Environment and pollution issues in India are now attracting attention of large institutional investors too. Morgan Stanley said issues related to Environment, Social and Governance (ESG) are new parameters for institutional investors and it is an enduring theme in the markets. “In case you are wondering if we have switched professions from being institutional money managers to being green activists, we haven’t. Our clients have become increasingly focused on ESG-related matters of companies that we invest in,” Morgan Stanley MD Amay Hattangadi and ED Swanand Kelkar said in a note to clients.

“It is a given that more money is going to chase companies that score highly on ESG and that will result in premium valuations. From an investing standpoint, this will be an enduring theme in the markets and companies that help provide environment-friendly alternatives to existing methods will be huge beneficiaries.”

In the Indian context, these could be providers of city gas, technology firms that help reduce emission, those engaged in production of clean power or facilitating it as financiers or contractors. Corporates and investors will do well to sit up and take notice of this new trend, Morgan Stanley report said.

Analysts said environment-related issues in India recently came to investor focus due to recent government action. This include Delhi government’s move to switch to odd-even number scheme for vehicles, stringent power norms for emissions from thermal plants and draft regulations to advance the implementation of Bharat Stage V and VI fuel emissions standards by three years versus the original schedule of 2019 and 2022.