Message from the Board – The Advent of ESG – Satyam, Shivam, Sundaram

The term “Revenge Spending” became popular after first Lockdown and I am sure besides experiencing this in your personal life, you might have analysed it with relevance for economic recovery, M3 money supply, inflation, and many other meanings. On similar lines, the latest trending term for us at CFA Society India is “Revenge Networking” – we saw a big bang restart of in-person events from 11th of March across each of the chapters. The first event was focused on general networking, and in most cities, it was planned over a game of box cricket! As I write this note, some cities have their networking events being planned out. It has been the best way to reconnect after about two years of digital events!

Over the past three decades, we have seen three mega trends and themes shaping up the capital markets and the world at large. It was the TMT theme in the 1990s, then we had BRICS in the 2000s and in the last decade, we had FAANG. I personally believe that ESG would become the “defining theme” of the current decade.

You might remember our flagship event for ESG being hosted by Pune chapter.The first marquee event was held in 2019 which focused on Corporate Governance in investing.

I recall I was in Pune for that event and I made a presentation outlining how ESG is a key responsibility of each one of us, and it is nothing new, but it is an age old practice, which is adhering to the Triumvirate of Indian values – more commonly known as “Satyam, Shivam, Sundaram”. Satyam (truth) is the ethical component of business, the key ethics that need to be adhered to at the core, whether in business or profession or whatever we do. It is just like how we as CFA charterholders always keep ethics in our core, starting from the learning outcomes of Level 1 exam and continuing in our daily lives. Shivam (welfare) is economic objective of business which effectively includes serving society at large. It is just like the mission statement of CFA Institute which is to promote highest standards of professional ethics and professional conduct and being a thought leader in the investment profession for the ultimate benefit of society. Sundaram (beauty) is the way in which we need to focus not external beauty but on the aesthetical outlook for business, purity of ideas and morality in behavior.

After the announcements at the COP 26 meeting few months ago, all major economies including India, have increased their pace of moving towards sustainable energy and reducing our carbon footprint.

We need to be aware that it is not just the large businesses, but in individual capacity, you and I are also contributing to the carbon emissions in a very big way. How? Today evening after you are back home from work and you settle in your comfortable corner for some fun Korean web series to unwind, the company providing the streaming has to ensure speedy access of that content reaching your screen as soon as you click your remote button. For this to work, they have to ensure their large data centers remain fired up with the high potential speed. Various estimates suggest that by 2025, about 1/5^th of the global electricity will be consumed by data centers.

This leads to the quest for more electricity and energy from sustainable or renewable sources. As India and rest of the world prepare themselves for the COP27 meeting in Egypt towards end of 2022, there is a huge urgency to move toward the targets of net zero. But this is not going to be easy or cheap. There are various estimates and a broad consensus is that for reaching “net zero” globally investments of more than US$ 5 trillion will be needed.

With such large investments estimated over the next 2 decades, Policy Makers as well as Institutional Investors will play a very crucial role. So in my view, we as CFA charterholders and finance professionals will have to enhance our contributions in a big way. Asset Managers have been increasing integration of using sustainable investing strategies. Large asset owners like Pension Funds & Sovereign Wealth Funds now demand that their investments are aligned with ESG and the Sustainable Development Goals. Increased awareness and knowledge enhancement is being spread by responsible institutes like the CFA Institute which has recently launched a special Certificate in ESG Investing to assist finance professionals to master environmental, social, and governance factors in the real-world investing. But still, such large amounts of investments are not going to be easy.

I recall one of the learnings from Uday Kotak when he was speaking at the CFA Society India Annual Wealth Management Conference in Mumbai, that things are never as good as they look or as bad as they look. Key is to look through that, focus on your ability to operate in the situation, and grow. It was very heartening to note that during 2021 India has already become one of the Top three countries for Investment & Deployment opportunities in Renewables as per the EY Renewable Energy Attractiveness Index. India’s rank raised from 7 in 2020 mainly due to initiatives on Solar front which had seen the Solar Power capacity in India rising to 39 GW overtaking Wind capacity for first time! Now after the budget 2022, India announced its Green Hydrogen Policy which could be a game changer in sustainable energy.

We all have to work collectively, starting with small steps. Remember, our economy is a wholly owned subsidiary of the environment, and all the best investment ideas would come to naught if we do not take care of the environment.

As we start FY-2023 with a renewed sense of optimism and revised forecasts, I would like to convey my best wishes for a blockbuster year ahead, and conclude while highlighting a few select events coming up: we have a session on Algo Trading in Pune on April 22, 2022. Mumbai will be hosting a celebration and felicitation of 50 founding members of the CFA Society India on April 23, 2022. Moving from founding members to welcoming new members – during the month of May we will have Charter Award ceremonies across all of the chapters. All the annual flagship events are restarting – we have already confirmed our flagship Annual Wealth Management conference in Mumbai on August 4, 2022, and all others will shortly get confirmed. Besides networking and knowledge enhancement, one of the key focus has always been career development and jobs – we will restart in person Financial Talent Summit with Mumbai being scheduled on May 7, 2022 and other cities in the coming months.

I am sure you will consider these events for your Revenge Networking – I hope to get an opportunity to meet with you, in person, very soon.