Transcripts
Welcome everyone. This is a brand new episode of Tech Lyceum, a podcast from Birlasoft. And on this episode, we have a very interesting theme we're going to be addressing. We're going to be talking about the ESG key value creation drivers. Now, to give you some context, in a recent CXO survey, ESG, or environment, social and governance, as we've come to know, it, has become one of the top priorities across the boardroom, with over 75% of CEOs sharpening their focus on net zero decarbonization to improve the green posture, and also addressing numerous other externalities which have become relevant to their investors and customers. Now to tell us more about this, we've got two amazing speakers joining us today. We've got Ayush Sharma, who leads the banking and capital market segment for birlasoft in the US and has held global executive and strategic consulting roles. The most recent role being Senior Vice President at Moody's Corporation, leading the Moody's ESG engineering team and now spearheading birlasoft’s ESG advisory practice for Fortune 100 financial services clients in ESG data management and product strategy. That's very impressive. We've also got Atul Kakar, who is vice president for BFSI at birlasoft, and has years of experience in banking and capital markets. Atul has worked across the value chain of financial services, including retail banking, capital market and payments, with rich experience in collateral management, governance, risk and compliance and trade lifecycle. Gentlemen, it's a pleasure to have you welcome aboard.
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Speaker – Ayush - 01:41
Hi Neerja, thank you so much for having me here.
Hi Neerja, thank you so much for having me here.
Speaker – Atul - 01:43
Yeah. Thank you Neerja, pleasure to be here. Thanks for doing this.
Yeah. Thank you Neerja, pleasure to be here. Thanks for doing this.
Speaker – Neerja – 01:46
Absolutely. Thank you, Ayush and Atul. Ayush, first question is coming to you.
Q: Tell us a little bit about this. Do you think ESG is real or misguided? What are your clients saying?
Absolutely. Thank you, Ayush and Atul. Ayush, first question is coming to you.
Q: Tell us a little bit about this. Do you think ESG is real or misguided? What are your clients saying?
Speaker – Ayush- 01:59
Well, Neerja, the short answer is ESG is real, but especially when you put a global perspective to it. And the way I see it is through three particular categories. The first one would be that, how are the fortune 100 enterprises reacting towards climate change and awareness? And we see it now. We see most of our fortune, 500 clients actually implementing their net zero strategy. We see them very active in the supply chain assessment, and which is actually applicable to suppliers like us as well. We also see the financially material metrics being more ESG centric. So that's a good sign. The second one, I would say, is look at the fastest growing economies that we have, especially with the CB board in India mandating top 1000 listed companies to disclose their ESG metric. The second example that I would like to bring is the Middle East or Saudi where they are transforming their mining operations to be more ESG compliant, which I think is going to be huge. And we saw in the cop 27 as well, where the climate change discussions shifted from what last year to how, right, which is also a good sign, right? So we see that progress. And I would say the third main driver is the consumer behavior. Now recently, birlasoft took part in CS 2023 we had close to, like, what 3000 plus exhibitors and net zero and climate and sustainability in digital transformation was at the forefront, which also says a lot, right? And these companies are global. They were small, they were mid sized. They were, you know, like fortune 10s as well. And to me, all of this together actually says that ESG is real, Neerja.
Well, Neerja, the short answer is ESG is real, but especially when you put a global perspective to it. And the way I see it is through three particular categories. The first one would be that, how are the fortune 100 enterprises reacting towards climate change and awareness? And we see it now. We see most of our fortune, 500 clients actually implementing their net zero strategy. We see them very active in the supply chain assessment, and which is actually applicable to suppliers like us as well. We also see the financially material metrics being more ESG centric. So that's a good sign. The second one, I would say, is look at the fastest growing economies that we have, especially with the CB board in India mandating top 1000 listed companies to disclose their ESG metric. The second example that I would like to bring is the Middle East or Saudi where they are transforming their mining operations to be more ESG compliant, which I think is going to be huge. And we saw in the cop 27 as well, where the climate change discussions shifted from what last year to how, right, which is also a good sign, right? So we see that progress. And I would say the third main driver is the consumer behavior. Now recently, birlasoft took part in CS 2023 we had close to, like, what 3000 plus exhibitors and net zero and climate and sustainability in digital transformation was at the forefront, which also says a lot, right? And these companies are global. They were small, they were mid sized. They were, you know, like fortune 10s as well. And to me, all of this together actually says that ESG is real, Neerja.
Speaker – Neerja – 03:45
Yeah, absolutely. I think that answer really puts things in perspective as well.
Q: Atul, is ESG relevant to the financial sector? What are your thoughts?
Yeah, absolutely. I think that answer really puts things in perspective as well.
Q: Atul, is ESG relevant to the financial sector? What are your thoughts?
Speaker – Atul – 03:53
See, ESG, ESG is relevant in all the sectors. Right? Agree that financial sector is not an emitter like the oil and natural gas and other, you know, factories and industries around, but it's, again, it's, it's everybody's responsibility to make sure the ESG is well taken care of, right, whether it's like, you know, reducing their carbon footprints, or whether it is like creating portfolios like, again, let me give you An example. If I'm a portfolio manager, right? I'm creating portfolios for my clients. I want to make sure that I include the products which are, or include the organizations which are, you know, ESG focused, right? And we have seen that value multiple is given to those, those products, or those, you know, portfolios which has been built, but more than that, right? No money aspect, and you know, his wealth creation aspect is, is one side of it, but the whole responsibility of an organization, you know, to reduce carbon footprints, to basically comply on ESG parameters, I think it's a must. We have seen what covid did to us. We can't take things. Granted, and whether it's financial sector or it's any other sector, is everybody's responsibility to make sure they align and report their ESG parameters to you know, to the agencies properly.
See, ESG, ESG is relevant in all the sectors. Right? Agree that financial sector is not an emitter like the oil and natural gas and other, you know, factories and industries around, but it's, again, it's, it's everybody's responsibility to make sure the ESG is well taken care of, right, whether it's like, you know, reducing their carbon footprints, or whether it is like creating portfolios like, again, let me give you An example. If I'm a portfolio manager, right? I'm creating portfolios for my clients. I want to make sure that I include the products which are, or include the organizations which are, you know, ESG focused, right? And we have seen that value multiple is given to those, those products, or those, you know, portfolios which has been built, but more than that, right? No money aspect, and you know, his wealth creation aspect is, is one side of it, but the whole responsibility of an organization, you know, to reduce carbon footprints, to basically comply on ESG parameters, I think it's a must. We have seen what covid did to us. We can't take things. Granted, and whether it's financial sector or it's any other sector, is everybody's responsibility to make sure they align and report their ESG parameters to you know, to the agencies properly.
Speaker – Neerja - 05:11
Interesting. Ayush, I have a question for you.
Q: Is there a way to measure ESG? Is there a score similar to a credit score for an organization,
Interesting. Ayush, I have a question for you.
Q: Is there a way to measure ESG? Is there a score similar to a credit score for an organization,
Speaker – Ayush – 05: 20
Yeah, Neerja, certainly, in fact, there are quite a number of global agencies, you know, such as MSCI, Bloomberg, Refinitiv, Moody's and similar. You would also see agencies which are operating regionally, because, of course, they are experts in their own region. Now we as systems integrator, Birlasoft, Corp marketing with lot of data providers. And we have certain criteria where we advise our clients to choose a certain data provider. And we have those criteria listed around four, four main areas, I would say one is on the ESG research coverage. So this is where you would look at entity, or a company or an organization through its region, the sector, the revenue, the scope, and then you also have the data sources. So the accuracy of data is important. Now accuracy goes, I would say, a long way, right? So it can be their primary source or secondary of how they are acquiring their data. The other one would be, in my view, reputation and usage, right? So the recognitions they have, the platforms they are using, the deployments that they have, and, of course, the rating scale algorithms, right? So we need to understand the methodology behind it. We need to understand what a score from one to 10 means, or one 200 What does a triple A score mean, or a minus d, or, you know, similar, right? So, so it's kind of complicated, but not complicated. A score makes it easier to kind of, you know, convey the message. But yeah, there are companies, there are scores available, and we are, of course, here to advise our clients on that.
Yeah, Neerja, certainly, in fact, there are quite a number of global agencies, you know, such as MSCI, Bloomberg, Refinitiv, Moody's and similar. You would also see agencies which are operating regionally, because, of course, they are experts in their own region. Now we as systems integrator, Birlasoft, Corp marketing with lot of data providers. And we have certain criteria where we advise our clients to choose a certain data provider. And we have those criteria listed around four, four main areas, I would say one is on the ESG research coverage. So this is where you would look at entity, or a company or an organization through its region, the sector, the revenue, the scope, and then you also have the data sources. So the accuracy of data is important. Now accuracy goes, I would say, a long way, right? So it can be their primary source or secondary of how they are acquiring their data. The other one would be, in my view, reputation and usage, right? So the recognitions they have, the platforms they are using, the deployments that they have, and, of course, the rating scale algorithms, right? So we need to understand the methodology behind it. We need to understand what a score from one to 10 means, or one 200 What does a triple A score mean, or a minus d, or, you know, similar, right? So, so it's kind of complicated, but not complicated. A score makes it easier to kind of, you know, convey the message. But yeah, there are companies, there are scores available, and we are, of course, here to advise our clients on that.
Speaker – Neerja – 06:53
Okay, I think that's a real sign that ESG is going to be very important in the years to come. Atul, I have a question for you,
Q: What are some of the big-ticket items? If you are not an emitter as financial sector,
Okay, I think that's a real sign that ESG is going to be very important in the years to come. Atul, I have a question for you,
Q: What are some of the big-ticket items? If you are not an emitter as financial sector,
Speaker – Atul – 07:05
See as Ayush also commented about, you know, a lot of ratings which are already there. And, you know, I talked about the responsibility the organization has on ESG space. But you know, the ESG measure organizations, they are advised constantly to measure three main pillars of sustainability, right? One is environmental, which is impact on environment. Second is social, how employees and other people are affected. And the third is economic, right? On where there is a value and how that translates to wealth, right? So we have to basically make sure all three parameters are well taken care of. With this premise, using ESG signals and portfolio construction to extract alpha, monitor risk and raise the overall portfolio ESG rating while reducing the short term and long term risk is a big ticket item. So that's where the the portfolio managers needs to be well aware of, you know how, how they construct their overall portfolio. Another one is to ensure compliance with all the international standards. So we have, you know, few, you know in mind, but there are, there are a lot, many, but things like un PRI, ungc, SASB, sdgc, to give some examples, right? So you know, you comply to those you make sure your portfolio is aligned and constructed based on what I talked about, and then I think, I think you're good. I mean, at least, at least that part the non emitters should focus on.
See as Ayush also commented about, you know, a lot of ratings which are already there. And, you know, I talked about the responsibility the organization has on ESG space. But you know, the ESG measure organizations, they are advised constantly to measure three main pillars of sustainability, right? One is environmental, which is impact on environment. Second is social, how employees and other people are affected. And the third is economic, right? On where there is a value and how that translates to wealth, right? So we have to basically make sure all three parameters are well taken care of. With this premise, using ESG signals and portfolio construction to extract alpha, monitor risk and raise the overall portfolio ESG rating while reducing the short term and long term risk is a big ticket item. So that's where the the portfolio managers needs to be well aware of, you know how, how they construct their overall portfolio. Another one is to ensure compliance with all the international standards. So we have, you know, few, you know in mind, but there are, there are a lot, many, but things like un PRI, ungc, SASB, sdgc, to give some examples, right? So you know, you comply to those you make sure your portfolio is aligned and constructed based on what I talked about, and then I think, I think you're good. I mean, at least, at least that part the non emitters should focus on.
Speaker – Neerja – 08:34
I think this was a great way for us to understand ESG, just a little bit more. Maybe there's a long way to go, but we hope to have more of these conversations with you. Thank you so much for joining us, Ayush and Atul and sharing your perspective on this.
I think this was a great way for us to understand ESG, just a little bit more. Maybe there's a long way to go, but we hope to have more of these conversations with you. Thank you so much for joining us, Ayush and Atul and sharing your perspective on this.
Speaker – Ayush – 08:47
Yeah. Thank you, Neerja. It was my pleasure to spend time and also talk about ESV, which is very close to me.
Yeah. Thank you, Neerja. It was my pleasure to spend time and also talk about ESV, which is very close to me.
Speaker – Atul – 08:54
Yeah. No, thank you, Neerja. This is, you know, being focused and being in the financial sector for long, it's always like, you know, being, as I said, creating wealth and doing what financial sector do is one thing, but then also caring about the responsibility, you know, towards ESG is another, bringing those two things in perspective. You know, thank you.Thank you for for doing this. And you know, happy to share my thoughts on that.
Yeah. No, thank you, Neerja. This is, you know, being focused and being in the financial sector for long, it's always like, you know, being, as I said, creating wealth and doing what financial sector do is one thing, but then also caring about the responsibility, you know, towards ESG is another, bringing those two things in perspective. You know, thank you.Thank you for for doing this. And you know, happy to share my thoughts on that.
Speaker – Neerja - 09:18
Absolutely. Thank you.
Absolutely. Thank you.
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