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From Compliance to Capital: Why ESG Scores Matter for Funding
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IoT and 5G: Driving the Next Wave of ESG Innovation
By Ashish Kansal
Bangalore. 07 April 2025. Our shopping decisions are influenced by many factors and one of the most prominent ones is the authenticity of the products. I am sure most of us, if not all, prefer products or services that are backed by trusted systems. For example, our foods need to be labelled organic, medicines FDA approved, vehicles BS IV or higher rated, electronics ISI certified and more. And now, we are moving towards an era where the products and services will need to be ESG Certified.
ESG takes into account the overall sustainability and ethics of an organization. It digs deeper into a product’s journey than its carbon footprint alone. ESG highlights an organization’s commitment towards its people, planet and community, adding a ‘Human Quotient’ to the business. Hence, now, even investors and fund managers look at the ESG scores when evaluating companies. This has caused a surge in organizations applying to get their ESG scores and even improving them.
Today, businesses, irrespective of their scale, have started incorporating ESG into their operations albeit in an unsystematic way. However, this has begun to change. Many organizations like S&P, Thomson Reuters, FTSE, Moody’s, Morningstar, MSCI, Bloomberg, GRI, SASB, and TCFD, etc. are framing policies, metrics and frameworks to measure and monitor the ESG implementation status of companies and generate rankings / scores.
It is interesting to note that companies with high ESG scores are or will do well in business has not been proven statistically. However, shift in consumer behaviors has brought a shift in enterprise behavior, which aligns with the belief that companies focused on the ESG front will do better in the future. Over a period of one to two decades, there would be enough data to prove this. For now, ESG activism is the order of the day.
ESG Financing
Who could have thought that a non-financial factor like a high ESG score would increase the credibility of a firm wanting initial or subsequent funding! Banks, FIIs, private equity funds, etc. now require an approaching firm to give proper ESG considerations in their project report or include an ESG / sustainability report in their annual report. These disclosures are important for the lending agencies as well as external stakeholders who may become critical to the project’s development. In addition to the official reports, firms should leverage blogs, press releases and social media announcements to highlight their ESG activities and build an overall positive persona in society. The investment fund industry has adopted 17 Sustainable Development Goals (SDGs) of the UN to measure sustainable development by organizations. In short, to attract investors, a business must have a compelling ESG narrative
Effect of IoT and 5G On ESG
Internet of Things (IoT) can play a key role in reducing the carbon footprint of businesses and residential complexes. Interconnected devices (enabled by IoT) are not only smart but also power efficient. Hence, more and more modern buildings (homes or offices) are being equipped with smart systems and electronics powered by green energy to significantly reduce their power consumption and therefore, carbon footprint. Real estate firms can claim credit for their ESG initiatives and stand to get better funding from lenders and more investment from ESG aware consumers.
IoT, along with smart communication and data processing technologies, is also helping the Government of India (GoI) develop 100 smart cities across the country through its urban renewal and retrofitting program, National Smart Cities Mission. As of September 2023, 6188 out of 7960 tendered projects have been completed.
5G provides faster speeds, reduced latency, and more capacity than earlier generations. However, its implementation has some negative effects on the environment, especially on the birds who are affected by the strong signals. However, various use cases have also shown that 5G technologies can improve sustainability with smart water management, smart waste collection, fuel optimization, real time fleet analytics, etc. in sectors like agriculture, transport, and utilities.
The real measurable benefits with respect to trends in improvement of environment, social and governance aspects are yet to be seen.
Implementation of ESG Practices
Top Defense Industry Players in India – Analysis
Below given are the status of ESG implementation and sustainability practices of some of the top defense industry players who command a large share of the defense business as well as investor faith in their performance:
| Industry player | Extent of ESG implementation |
| Taneja Aerospace and Aviation Ltd. | The company has filed its annual report with required financial disclosures and some non-financial disclosures viz. CSR spending and corporate governance. |
| · High Energy Batteries (India) Ltd.
· ideaForge Technology Ltd. |
An Esvin Group company falling under the MSME category, has filed its annual report with required financial disclosures and some non-financial disclosures viz. CSR spending and corporate governance. Briefs on the energy conservation activities employed in their plant / office have been given. |
| Cochin Shipyard Ltd. | The company has included BRSB report as a part of its annual report and has elaborated on the implementation of various activities in compliance to conservation of environment, compliance of social norms and disclosures as per corporate governance principles. Compliance / comments on all 9 NGRBCs principles are provided. Company has provided details of various green projects undertaken, community development programs and various initiatives towards promoting sustainable development. |
| · Data Patterns (India) Ltd.
· Bharat Electronic Ltd. · Paras Defence and Space Technologies Ltd |
The company has included BRSB report as a part of its annual report and has elaborated on the implementation of various activities in compliance to conservation of environment, compliance of social norms and disclosures as per corporate governance principles. Compliance / comments on all 9 NGRBCs principles are provided. |
| Sika Interplant Systems Ltd. | The company has filed its annual report with required financial disclosures and some non-financial disclosures viz. CSR spending in health, education and environment sustainability as well as corporate governance. Brief on the energy conservation activities employed in their plant / office has been given. |
| Bharat Earth Movers Ltd. (BEML) | BEML calls itself a green company. Company has adopted CSR and sustainable development policy. The company has included BRSB report as a part of its annual report and has elaborated on the implementation of various activities in compliance to conservation of environment, compliance of social norms and disclosures as per corporate governance principles. Compliance / comments on all 9 NGRBCs principles are provided. |
As per the data from various defence players, the extent of reporting and disclosures in their respective annual reports (FY 2022-23) varies widely. This could be due to non-enforcement of stricter norms towards disclosures of ESG practices by MCA / SEBI or it could still be a work in progress.
It needs to be noted that though defense industry stocks are regarded as ‘sin stocks’, they are necessary for a country’s defense. There is a divided opinion globally on whether investment managers should recommend defence stocks. Probably, with the addition of ESG and sustainability as parameters, one could re-classify defense stocks as good or bad. Interestingly, India won’t be a suitable ground for this study as Indian defence industry stocks are performing reasonably well and are included in the portfolios of retail as well as institutional investors.
To begin with, corporates should aim for Net Zero i.e. remove the same amount of carbon from environment as they are emitting. ESG is an effort to have more human-centric and environment friendly business practices and this needs at the heart of every business decision making. There is no room for Greenwashing.
Firms must also avoid bad ESG practices that do not have any long-term vision, leaving them with maintaining the value of assets that would ultimately become stranded over time. This is particularly applicable to the defense industry that still uses old legacy systems, faring poorly on the ESG front. These stranded assets are large in number and will keep growing, until the Ministry of Defense comes out with policies to dispose of such systems in an environmentally friendly manner.
This wave of ESG considerations has spread far and wide across continents. America, Europe, and Japan are leading the drive with their research and analysis to formulate the metrics on which companies could be rated / scored with risk adjustments for different industries and sectors. Future product differentiation (and price premiums) for sustainably produced metals and industrial goods is a real possibility. Just as ethically produced coffee is more expensive, conscientious Tesla drivers may want to know where the copper in their cars’ engines came from.
(Ashish Kansal is a seasoned strategic and communications expert with over 25 years of experience at Bharat Electronics Limited (BEL), where he played a key role in marketing, product support, and corporate communications. Currently, he serves as an Independent Director at Infonative Solutions, bringing his vast experience in technology-driven solutions and market expansion strategies. The views in the article are solely the author’s. He can be contacted at editor.adu@gmail.com).
