Future Proofing – Indian Companies Addressing the Climate Challenge

Climate Change

India’s committed to net zero by 2070. We examine how businesses are adapting their practices, explore progress made and highlight the role we play as investors in tackling climate change through allocation of capital and engagement.

We recently examined India’s journey to net zero. This time round we look at what climate change and net zero pledges mean for companies and how we have been using active management to encourage best practices.

Climate change is already having an impact on how companies operate

The UN states that “water is the primary medium through which we will feel the effects of climate change” as rainfall becomes more erratic. The World Resources Institute already ranks India in the most severe water stress category. Given the growing demands from multiple stakeholders on a decreasing water supply, companies that are irresponsible with their water consumption can suffer real reputational damage.


Many businesses have been adapting to improve their resilience to water stress. One such example is our Indian portfolio holding Torrent Pharmaceuticals which reuses and recycles 87% of their wastewater. This not only reduces overall freshwater consumption but also allows them to adapt to fluctuations in water supply that can be caused by extreme weather events like drought, which is made more frequent by climate change.


Companies must future-proof their businesses against these risks, as well as those stemming from regulatory, legal, and reputational issues, by reviewing – and in some cases redefining – corporate strategies to align their activities with climate change mitigation and adaptation.

Country and Corporate Net-zero pledges

Prime Minister Modi’s announcements at COP26 focussed on increasing renewable energy capacity to meet the net-zero 2070 pledge. More information is needed to assess exactly how these targets will be met and what risks and opportunities Indian corporations will face. But, despite policy uncertainty, many of the companies we invest in have already made significant strides in increasing the proportion of renewables in their energy mix.

Although we tend not to hold companies in the most emissions heavy sectors, we are pleased to see that our Indian holdings are thinking long-term and committing to reductions of emissions well ahead of the government’s timeline. However, setting a net-zero goal is just the start of a long journey. There are many challenges in measuring, reporting, and reducing emissions and there can be gaps between ambition and action. We have been engaging with these companies to get more detail on how they plan to achieve their targets.

Climate change engagement

In 2021 we held a number of conversations on climate change with our Indian holdings encouraging them to:

  • Participate in the Transition Pathway Initiative (TPI) data validation process as part of the Climate Action 100+ initiative.
  • Improve climate strategies by:
    • articulating short- and medium-term emissions reduction targets,
    • improving climate-related disclosures,
    • aligning capital expenditure with climate goals,
    • develop policies on climate-related lobbying practices.
  • Set science-based targets for emissions reductions.

Case Study – HDFC Bank

HDFC Bank is a leading provider of Consumer Finance in India with dominant positions in all key consumer segments including, personal loans and credit cards. It has track record of over 26 years of conservative growth.  

In June 2021 HDFC Bank committed to achieving carbon neutrality by 2031-2032, we support the actions management is planning to take to get there. We are also supportive of the strategy the bank is now developing to address climate change risks in its portfolio, including investing in data and test tools for developing climate risk assessment and scenario analysis.

We would still like to see the bank improve its climate change risk management strategy. In recent conversations we asked HDFC for a strategy that addresses fossil fuel financing, financed emissions and enhanced reporting be developed. We have also encouraged them to take action to measure and reduce carbon emissions across their lending and investment portfolios. We are encouraged that management is working on a plan to tackle this, including signing up to the TCFD and committing to set science-based reduction targets.

Case Study – Reliance Industries

India’s largest and most profitable company, Reliance Industries, is also one of the country’s largest emitters of greenhouse gas and other air pollutants. Over recent years, management has been driving an ambitious transformation of the business that has seen it evolve from a pure energy player into a retail and technology giant. However, its energy-related businesses, which include petrochemicals, oil refining and marketing and oil & gas exploration and production, are still massive and have a significant carbon footprint.

We engaged with the company in late 2019 and encouraged the company to incorporate the various initiatives management had been driving to curb emissions and support the group’s transition to a low carbon economy into a more cohesive strategy and improve transparency. Fast forward to July 2020, when Reliance Industries, in a first for an Indian conglomerate, announced its ambition to become net carbon zero by 2035. We swiftly arranged a meeting to discuss the strategy supporting this ambition.


At the International Climate Summit 2021 last June, Mukesh Ambani, the Chairman and CEO, announced the company’s ambition to help make green hydrogen the most affordable fuel option in India. And, at the beginning of this year we heard more detail on how they plan to achieve their net-zero ambitions including plans to invest US$80 billion in green energy projects. These announcements make us confident that the company is on track to meet its 2035 net zero goal. We will continue our active engagement with Reliance, which we are pursuing both individually as well as collaboratively through Climate Action 100+, to encourage the company improve overall climate-related governance, management and disclosures.

We welcome companies’ actions in this space as greater action to cut emissions can improve both their corporate profile and bottom line, whilst preparing them better for potential future carbon-related regulations.

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