Five Questions about SRI – Weekly Expert Interview with Jatin Kapoor, Regional Head, Southeast Asia, Emergent Ventures International, India – December 7, 2012

Each week Emerging Markets ESG publishes an interview entitled, “Five Questions about SRI.”  The interview features a practitioner’s insights about SRI in emerging markets and through Emerging Markets ESG shares this expertise with a wide global audience.  The goals of Five Questions about SRI are fourfold:

  • To collect a catalogue of examples of SRI in practice in emerging markets;
  • To raise awareness about SRI in emerging markets;
  • To reflect on what SRI in emerging markets means to practitioners; and
  • To enable SRI practitioners in emerging markets to network with peers around the world.

This week’s interview is with Jatin Kapoor, Regional Head, Southeast Asia, Emergent Ventures International, India.

Emergent Ventures International (EVI) is a global consultancy firm providing customized and comprehensive sustainability, renewable energy and carbon solutions. EVI’s integrated offerings create strong proposition for investors, corporate, policy makers and masses.  EVI helps companies and investors in gauging the ESG risk and opportunities faced by their organizations in order to improve efficiencies and optimize revenue streams.  EVI Singapore is a signatory of the UN Principles for Responsible Investment (UN PRI).  Jatin Kapoor currently leads EVI’s Southeast Asia operations and the ESG business function. He brings over eight years of experience in ESG, carbon markets and clean energy space in South and Southeast Asia. Jatin has led EVI’s expansion in Southeast Asia and set up operations in Thailand, Indonesia, Malaysia & Singapore. He has worked with banks, private equity funds and other financial institutions on conducting investment grade technical, regulatory and ESG due diligence of renewable energy transactions. Jatin has also led several policy development assignments and capacity building workshops with governments and industry for clean technology, carbon markets and sustainable development in the region.  Jatin holds a degree in chemical engineering from National Institute of Technology- Surat, India and a Masters in Business Administration from Alliance Business Academy- Bangalore, India.

Emerging Markets ESG:  How would you define socially responsible investment (SRI)?

Jatin Kapoor:  The way companies manage Environmental, Social & Governance (ESG) issues has become a major concern for investors across the globe. Socially Responsible Investment (SRI) is a means of identifying such companies/ projects/ opportunities which ensure effective utilization & growth of capital in a more sustainable manner.

SRI not only promotes socially conscious businesses but is also an instrument of mitigating investment risks, which of course makes sense for the investors.

Emerging Markets ESG:  What distinguishes SRI from mainstream investment? 

Jatin Kapoor:  Interesting question for someone working for mainstreaming of SRI! I feel the SRI transaction isn’t too different from traditional investment. If anything it should become more transparent with a lot of discreet risks being highlighted. I see several ‘mature’ investors gradually shifting their portfolio from mainstream investment to SRI.

Mainstream or traditional investment focuses only on one of the three elements of the TBL (Triple Bottom Line) while SRI has a more comprehensive approach.

Emerging Markets ESG:  Which extra-financial theme – environmental, social or governance – is the most challenging for companies in Southeast Asia to manage?

Jatin Kapoor:  In order to articulate the importance of any additional theme, it needs to be framed within the context of the business. Typical issues in Southeast Asia that companies struggle around are community issues, climate change, land-use management, immigrant work force management, competing usage of natural resources, corruption etc.

The biggest challenges for companies in South East Asia are lack of robust understanding of ESG risks, keeping up with continuously evolving policies around ESG (compliance requirements) and the fast maturing consumer demands for transparency around environmental performance.

Emerging Markets ESG:  Which extra-financial theme – environmental, social or governance – is the most challenging for investors in Southeast Asian companies to analyze?

Jatin Kapoor:  This could vary from country to country or even deal to deal. For investors whatever has the most impact in terms of severity (high impact/low impact), time horizons (more imminent/distant) and probability (high/low) is most important. Investors tend to focus on establishing key performance indicators (KPIs) and analyzing environmental performance regularly. But this is primarily because most of the environmental indicators are quantifiable, which is not so straightforward for social or governance issues. Information on these parameters is still not very organized and requires thorough on-ground due diligence.

In a recent assignment in Thailand, the impact of waste water disposal from a distillery was within the current prescribed limits, but prolonged exposure to the odor from this waste water was gradually forcing the local population to relocate. Today, issues like these don’t get captured unless the investors conduct a thorough stakeholder assessment.

Emerging Markets ESG:  How and where do risk management, SRI and sustainable development converge in Southeast Asia

Jatin Kapoor:  Sustainable development being integrated into the corporate or investor decision-making process introduces several new variables into the risk matrix. This often leads to complications. Understanding these linkages of ESG factors and investment risks is still a challenge for investors and corporates. At present, companies in Southeast Asia have limited ability to identify the magnitude of environmental, social, and governance risks across their value chain. Hence investors are often unable to articulate or quantify the ESG risks or value created.