Kerala preparing first-of-its kind policy to promote environmental, social and governance investments

New Delhi: Kerala is preparing to come out with a first-of-its-kind policy to promote environmental, social and governance (ESG) investments as the southern state focuses on the ease of doing business as well as living to attract more investors.

The state's Industries Minister P Rajeev said experts are being consulted for finalising the policy, wherein the government also plans to provide incentives for ESG investments.

The Left Democratic Front (LDF)-ruled state, where there is scarcity of land and population density is also high compared to other states, is focused on "responsible investment and responsible industry".

In recent times, there is an increased focus on ESG investments globally and ESG is also gaining traction as a strategy for creating value for businesses in the long term.

According to Rajeev, global trend is that one-fourth of the industrial investments are based on ESG and developed countries are giving priority to such investments.

"The state government is preparing a draft policy to promote ESG investments. We are thinking to give more incentives to ESG investments.

"Our focus area is related to ESG-related industries such as agro-based industries, food processing, financial institutions, IT and electronics," he told PTI in an interview here.

The minister said the drafting process is on and the policy document is expected to be finalised within two to three months. The government is looking to gather views of experts from different parts of the world and some professors from Oxford University have also shown interest to help the state in preparing the document.

Emphasising that "ESG is the need of the day", Rajeev, a former Rajya Sabha member, also pointed out that after floods and natural calamities, the state government has taken various steps to ensure the equilibrium regarding environmental aspects.

"Kerala, recently, adopted a logistics policy and we are the first state in the country to adopt a state-level logistics policy. I think Kerala may also be the first state in the country to finalise an ESG policy," the minister said.

The state's main attraction is the "ease of living" as it has good air, water, healthcare and education system, he said, adding that the ease of doing business should be in a realistic manner.

According to a booklet issued by the state government, Kerala is well positioned to become the hub of sustainable investments. The LDF government led by Chief Minister Pinarayi Vijayan has just completed six months in office after sweeping the state polls earlier this year for the second consecutive term.

In a recent report, consultancy EY said that in an increasingly uncertain and volatile world that is throwing up new challenges for the businesses, ESG provides a framework for businesses for staying resilient by holistically safeguarding people, the planet and profits.

It had noted that environmental, social and governance is used to categorise aspects that were conventionally associated with sustainability and corporate responsibility but have material financial impact on the organisation's short and/or long-term value.

"... an ESG centric approach has helped investors and organisations unearth hidden risks in environmental and social aspects, mitigate them and identify new opportunities, which may not be possible from conventional approaches," the report had said.