Indian Institution of Corporate Affairs (IICA) and Bombay Stock Exchange Ltd (BSE) have joined hands to develop a corporate social responsibility (CSR) index, take up capacity building on CSR, conduct education and awareness programmes and other activities to facilitate a more effective corporate participation in CSR areas.
The proposed IICA-BSE CSR Index shall assess impact and performance of companies listed on BSE in CSR activities. The index would also look at the performance of companies in their mandatory CSR spend as per the new Companies Act, 2013, as one of the important and objective criteria.
The information provided in the public domain on CSR activities by these listed companies shall have more preference in the various evaluation parameters of the index. Performance of the companies in CSR areas would be combined with the market performance of companies for selection of the firms. The index would be sector neutral.
Through this MoU, BSE, under which more than 5,200 companies are listed, shall enable to get more comprehensive perspective of CSR practices followed by Indian corporate across various industries segment.
IICA-BSE proposes to form an advisory committee which would guide for the construction and design of CSR Index.
"Transparency is very important; so the companies must disclose their spending and areas of spend on their own websites and the MCA (ministry of corporate affairs) website as well. The IICA and BSE partnership will go a long way on raising the level of awareness and accountability," said Sachin Pilot, minister of state for corporate affairs.
As capital market gets more aligned to international norms, long-terms investors with very sizable amount of investible money such as pension funds, insurance companies and funds with mandate of responsible investment would look at such index and its top performers to decide their investments. Globally it has been observed indices based on CSR or environmental, social and corporate governance (ESG) themes have outperformed the benchmark indices.
According to R Ramadorai, chairman of BSE, "BSE through this partnership with IICA shall work on CSR Index which will be driver for CSR practices for the Indian corporate world and an ideal option for investors to put their money for ‘responsible investment’. Increasingly more investors are considering CSR as an important investment theme both globally as well as in domestic markets."
As per the new Companies Act, 2013, it has been mandated for eligible companies to spend 2 per cent of their profits on CSR activities.
(Edited by Joby Puthuparampil Johnson)