Samir featured in the Financial Express: “Watch the Green Ticker”

New Delhi, 29th of May 2012
Please find here the link to the original article and the website of g-Trade.

When you are investing in a company next time, just do not go for cash-rich companies. Rather choose the corporates that are ‘green’ efficient. And there is help too, to guide you make this decision. Three months back, Bombay Stock Exchange(BSE) along with g-Trade, a privately held company in India, had come up with a Green Index called Greenex. This is India’s first carbon-efficient live index listing the top 20 companies which are carbon efficient. As of now, only the carbon emission of top 100 BSE companies is assessed by this partnership and the index is created. But the aspirations of Samir Saran, founder and CEO, g-Trade are high. “We are in the process of creating a similar index across BSE 500 companies in the next six months,” he says.

The idea of creating something like Greenex came to Saran while he was studying in Cambridge and working on a project on energy efficiency. “I knew that we needed to reduce carbon emission intensity in our country and corporates will have to do this first. Thus, this was the best way to measure how environmentally efficient companies are and how they can improve themselves,” he says.

Now, the fact sheet: India is fourth largest carbon emitter in the world, behind China, USA and Russia. The European Union put together would be above Russia. Japan is after India. And to add on, Indian corporates (business and industry as a whole) contribute almost two-thirds of carbon emissions, other major contributors are transport, agriculture and waste sectors.

Saran spent 16 years in the energy sector. For a long time, he was working with Reliance Industries in the policy space especially with oil and gas and petrochemical sector. He feels that the corporate behaviour towards climate and environment of top corporates needs to be checked. “The main issue is that we need to manage emissions. Emission efficient and carbon efficient companies will manage the growth of our economy. And investment towards these companies should be encouraged. They should be given priority over companies that are less efficient by investors.” Even the government has committed voluntarily to improve the emission intensity of the country’s economy (GHG emissions/GDP) by 20-25% during 2005-2020.

Usually large companies come out with reports of disclosure of their carbon emissions under Form A of The Companies Act. The Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 mandates a company to disclose, in its Director’s report, the energy conservation, technology absorption, foreign exchange earnings and outgo.

Form A does not include sectors like retail and supply chain. The government has identified the high energy industries and included it for disclosures by companies. It does not include new industries which have come up.

It also does not include all energy intensive sectors like electric utilities and oil and gas exploration and production firms. Saran says, “To derive a meaningful emission, we have derived our index by giving 50% weight-age to emission intensity and 50% to financial performance.”

Green effect on the balance sheet

Companies that are low on emission intensity (GHG/revenue) also generally perform well on financials—mainly due to their lower energy costs, better operational controls, better resource management, better general sensitivity, and better market image. This is a global trend. “Companies that have less carbon emissions are more efficient and are likely to succeed in the future,” says Saran.

Sample this: IDFC, a financial services company, being least efficient in the low emission intensity group, has underperformed the BSE Sensex by 31% between January 2010 and January 2012. The Green Index does not include big names like Reliance Industries, Oil and Natural Gas Corporation (ONGC), cigarette maker ITC and even IT companies like Wipro and Infosys. However, the names topped in the list are BHEL, GAIL, DLF and L&T.

Companies must realise that there are many benefits to be on the Green Index. Saran says that based on this index, banks would lend to green efficient companies on better interest rates. It would also help the insurance sector in giving pension funds. In the west, insurance funds and pension funds usually invest in green stocks only. This trend could also be followed in India. And in Europe, this kind of an index was developed 11 years ago called FTSE4good. This means that our country still has a lot to catch up!

But, what would make revenues for g-Trade? Saran is clear on this front too. “Some companies want us to create a customised index for them so that they know where can they invest. We also come out with exhaustive reports where we inform lenders and investors that where should they invest in India. This will help in foreign investment in India. We create structured products for big hedge funds etc who want to invest in different countries.”

Let us hope the Indian companies get green rich and realise that they will be incentivised on their efforts to reduce carbon emissions.

Columns/Op-Eds, Politics / Globalisation

Article in Financial Express: Identity and Access in Uttar Pradesh

by Samir Saran and Vivan Sharan
January 30th, 2012
Please find here the original article

Uttar Pradesh (UP) is home to a population similar in size to Brazil and is spread out over a vast area, ranging from the fertile Gangetic Plains to the arid Vindhya Hills. It has traditionally also been the state that shaped national politics and the caste, class and religion based political landscape is representative of the complexities of democracy in India. It is also today a state that defines the challenges that lie ahead in the coming decade and more. Be it physical or social infrastructure, employment or environment, industry or agriculture, multiple narratives within the state need to be reconciled. However, the causal relationship of caste with opportunity continues to be most vexed. There are significant divergences in access to the basic necessities – water, electricity and modern cooking fuel (two out of Mayawati’s election rally cry trio of ‘bijli, sadak and paani’) across this geography. Once rich in economic growth potential, driven by the gains achieved by the agriculture sector through the Green Revolution, the state is now the primary contributor (21.3%) to the overall poverty in the country as per the Multi Dimensional Poverty Index of the UNDP with close to 70 percent poor households.

Over the years, the state has seen increasing political emphasis and rhetoric directed at the marginalized social groups that exist within the state, as a strategic ploy to secure voting constituencies. This specifically includes people categorised as Scheduled Castes (SCs) and Other Backward Classes (OBCs) who represent majority proportions in relation to the total population of the state (Figure 1). It is ironic then, that the average income of SCs and OBCs in UP, is over 18 percent and 20 percent lower respectively, than the all India average, according to the latest NSS data compiled at the India Data Labs at the Observer Research Foundation.

India DataLabs @ ORF: NSSO Consumption Expenditure 2009/10

In terms of access to drinking water (within dwelling) the SCs are the worst off amongst the 3 groups, followed by the OBCs. The Central, Eastern and Southern regions (the NSS divides the State into 5 regions found in Figure 1) fare poorly; a combined average of around 35% of SCs and OBCs have access within their dwellings in these regions, compared to close to 60% in the relatively prosperous Northern Upper Ganga Plains. This average diminishes to an appalling 14 percent in the Central, Eastern and Southern regions if only SCs are considered.

Inherent barriers to social and economic mobility have compounded the inequities created by lack of basic infrastructure provision, and political apathy towards development in the state. These worrying realities are exacerbated by the fact, that there has been negative growth in access to electricity (an average of -15.23%), over the five year period 2004-05 till 2009-10, in the Central region and negligible growth in Eastern region, amongst all of the aforementioned social groups (Figure 2). This negative growth is primarily driven by the sharp decline of access in urban areas. A nearly 22% decline over the 5 year period, in access to electricity in the case of OBCs living in urban areas located in the Central region, is instructive of the fact that despite representing the largest political constituency in the region, they have been unable to secure commensurate development entitlement.

India DataLabs @ ORF: NSSO Consumption Expenditure 2004/05 & 2009/10

A recent World Bank Report on “The Role of Liquefied Petroleum Gas in Reducing Energy Poverty” suggests that everything else being equal, a higher level of LPG access is positively correlated with higher education levels in households in developing countries such as India. Unfortunately, there are large inequities in access to the modern cooking fuel across social groups (Figure 3). While affordability is a key concern, and according to the report, high costs are the most important determinant preventing consumption shifts across households; from less efficient primary sources of cooking fuels such as firewood, there are few justifications that help resolve facts such as – OBC urban households in the Central region have shown a 30 percent decrease in access to LPG over 2004-05 to 2009-10 (while access has remained nearly stagnant in rural areas).

India DataLabs @ ORF: NSSO Consumption Expenditure 2009/10

Indeed income class has a bearing on the levels of access to drinking water, electricity and LPG, and this is particularly true in developing societies, where lack of access reinforces income groups and in turn sharpens particularities of social groups. Low income poverty traps are dominant since the poor have no means to improve existence, owing to mediocre infrastructure, poor education and skills attained, lack of health services and poor productivity levels perpetuated by inequitable access to these essentials. The overall lack of access to specific social groups across regions, as visible in the case of UP, only adds to the sustained and absolute poverty levels of the state.

The higher levels of development seen in the Northern and Southern Gangetic Plains, serves to highlight that, successive governments have been unable to leverage the agricultural productivity of the region and enhance basic infrastructure throughout the state. The logical conclusion is then, that the bulk of the development in the state has resulted from proximity to water and fertile soil and the development of industry, rather than policy or administrative interventions, affirmative action or otherwise. Over the past decade, in the aggressive battle for votes, political parties have emphasised an inclusive development agenda and rallied support through promises for social mobility across castes and classes. The statistics while telling a part of the tale do suggest such promises to be mere rhetoric. Even in regions where some groups have telling political weight, ‘Bijli’ and ‘Paani’ eludes them. This is certainly a dangerous’sadak’ for the most populous state of the country, to keep treading on.

*Samir Saran is Sr. Fellow & Vice President and Vivan Sharan is Associate Fellow at the Observer Research Foundation, New Delhi.