Green Growth Through PPPs
Public-Private Partnerships (PPPs) have been adopted as a mechanism that enables governments to drive forward previously publicly-controlled infrastructure projects, without bearing the entire financial burden.
Two senior government advisory experts from CLA Global Indus Value Consulting – Asma Siddiqui and Suvayu Ray - share how a surge in Environmental, Social, and Governance (ESG) reporting is moving India closer to its Paris ESG Agreement goals while simultaneously helping to transform progress within India’s PPPs framework to build a climate-resilient future.
Powering India’s Growth Engine
Public-private partnerships (PPPs) have emerged as a cornerstone for India’s growth strategy and overall economic development. Far from a new concept, some of the earliest PPPs can be dated back to early railroad projects. Supporting the financial viability of projects, as well as facilitating more innovative and acceptable methods to finance projects, allocate risks, and provide growth opportunities for the marginalized, the PPP momentum continues at pace.
In the mid-1990s, Tata played a significant role in delivering power to householders through the Tata Hydroelectric Power Supply Company. Other private investments ensued, supporting the development of highways. PPPs in India are now regarded one of the largest and most successful global programs that supports the delivery of high-priority public utilities and infrastructure projects.
Right now there are estimated to be 2000 PPP projects at various stages of implementation in India. Defined in 2011 by the Government of India as “an arrangement between a statutory / government owned entity and private sector entity,” these cooperative PPPs have demonstrated just how swiftly and efficiently public infrastructure and various services can be developed.
Testament to the progress, the Prime Minister’s Gati Shakti National Master Plan was unveiled in October 2021. This digital infrastructure platform was introduced to create better synergy and unite planning to facilitate complete transparency and optimize resources between interconnected ministries and economic zones. Known as India’s megaproject, the PM Gati Shakti National Master Plan is purported to be worth $1.2 trillion USD.
Following a more coordinated multi-modal macro and micro management framework, as well as expediting work completion, the PM Gati Shakti forum helps to ensure all project stakeholders follow set government principles and are aligned to ESG expectations.
Conscious Coupling of ESG in PPPs
With investor demand fueling sustainability disclosure regulation worldwide, the surge in global investments in India PPPs is also driving the adoption of ESG reporting. Providing investors with greater assurance, 2024 is anticipated to be the year when many companies, and consequently investors, adapt more rigorous ESG data collection and reporting practices.
Having a more robust ESG reporting framework for PPPs in India underlines the government’s commitment to responsible development. These frameworks supported by these evolving regulatory regimes extend well beyond compliance. As well as attracting new investment, these frameworks also have the potential to reduce PPP financing costs.
The benefits of a strong ESG reporting system are clearly multiple. Scrutinizing the ethical and sustainable credentials , including procurement policies, labor practice and responsible sourcing, increases investor confidence, as well as competitiveness. Furthermore, proactive management of social and environmental risk can give a more holistic view of the entire project and provide early warnings of potential issues. This deeper understanding is not only a strategic advantage that helps to boost social acceptance of PPP projects, but also underscores the global urgency that is driving companies to engage proactively with sustainability principles.
The message is unequivocal: the time for ESG reporting action is now.
Bridging the ESG standardization gap
Until recently, implementation of effective ESG reporting frameworks was regarded as a significant obstacle in India’s PPP landscape. Having no standardized system, and with it largely being voluntary, inhibits transparency. Inevitably, with the sheer volume and scale of developments and investments planned under the PM Gati Shakti National Master Plan, visualizing the real impact of projects has made introducing ESG reporting even more critical.
Recognizing this, the Securities and Exchange Board of India (SEBI) introduced a new reporting framework in early 2024, providing a significant springboard for reporting sustainability and responsible business conduct in India. Many of these guidelines can be applied, adopted and standardized for PPPs.
The Business Responsibility and Sustainability Report (BRSR) replaces the previous Business Responsibility Reporting (BRR) system. It’s aim is to bring greater clarity and standardization to ESG disclosures from India’s top 1000 listed companies by market capitalization.
Aligning to international standards, including the UN Sustainable Development Goals, the Paris Agreement, and the International Labour Organisation (ILO) Core Conventions, the BRSR format comprises a specific set of ESG disclosure metrics. To reflect India’s market, additional social-driven KPIs are recognized, for instance business openness, job creation in small towns, and gross wages paid to female workers.
To facilitate effective international comparisons, intensity ratios based on revenue can be adjusted to provide purchasing power parity. Other ESG attributes included in the BRSR reporting requirements cover green-house gas (GHG) emissions (scope 1, 2 and 3), water and energy usage, waste management, biodiversity impact, employee-related wellbeing and safety, gender diversity, community and consumer initiatives, as well as governance disclosures, including anti-corruption policies.
Given than it has become imperative to meet the environmental commitments of the Paris Agreement, the Indian government is intensively focused on sustainable business practices. In order to achieve the 45% reduction in carbon emissions target by 2030 and reach net-zero status by 2070 collaboration with the private sector is required. Consequently, the nation is swiftly getting behind these interconnected programs. This in turn is spurring even more international and domestic PPP investment.
Achieving these ambitious goals and attracting even more capital investment will largely be driven by improved market perception and long-term value creation. With more PPPs on the horizon, ESG reporting in India is expected to accelerate and become more mainstream. Leading to greener, more responsible business practices.
For further information
Suvayu Ray
Senior Partner – Digital and Government and Public Sector Advisory
CLA Global Indus Value Consulting
https://claivc.com/directory/savayu/
Asma Siddiqui
Senior Consultant, Government & Public Sector Advisory
CLA Global Indus Value Consulting
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