Icra ESG Ratings report highlights the growing integration of ESG principles among retail NBFCs

A recent report by Icra ESG Ratings, titled Retail NBFCs – Beginning The Shift Towards a Sustainable Future, highlights the progress made by top retail Non-Banking Financial Companies (NBFCs) in India toward integrating Environmental, Social, and Governance (ESG) principles into their operations. The report shows that these companies are actively working to reduce their environmental impact and increase their social contributions.

ICRA ESG’s analysis, based on the latest Business Responsibility and Sustainability Reporting (BRSR) disclosures, reveals that the top 10 retail NBFCs by market capitalisation have achieved a notable reduction in key environmental indicators over the past three years. Greenhouse gas (GHG) emissions have decreased by an average of 19%, while energy usage has reduced by 7%, despite the expansion of operational footprints, including a 13 per cent increase in branches between FY2022 and FY2024.

Sheetal Sharad, Chief Ratings Officer at Icra ESG Ratings, commented, “It is encouraging to see that players are integrating ESG principles into their operations. The reduction in GHG emissions has occurred even as these companies continue to expand. While renewable energy adoption has been slow, we have seen positive developments, such as 50 per cent of the entities in our sample set achieving 100% waste recycling.”

The report also highlights that 60% of the companies have defined sustainability targets, demonstrating a growing commitment to green practices. Initiatives include reducing paper consumption, installing rooftop solar plants, and aligning with international standards such as the UN Global Compact Network and the Science Based Targets initiative (SBTi).

In terms of social impact, the sector has increasingly aligned with the United Nations Sustainable Development Goals (SDGs), with most companies meeting 70 per cent of the goals. Key social initiatives include an increase in wages paid in rural areas (from 28 to 31 per cent YoY in FY2024), and a 24 per cent growth in corporate social responsibility (CSR) spending, with a focus on healthcare, education, and skill development. The report also notes that gender diversity remains a challenge, with female participation in the workforce at 12 per cent, although female representation on boards has slightly increased.

Sharad concluded, “The growing CSR spend and alignment with UN SDGs demonstrate the sector’s commitment to sustainability and community development. These efforts contribute to India’s broader climate and development goals. While the sector is headed in the right direction, continued efforts are necessary to address areas that still need improvement and maintain momentum.”