Faculty & Research

Arun Duggal Centre for ESG Research (CESGR)

About the Centre

The Arun Duggal Centre for ESG Research (CESGR) at IIMA has been set up to contribute to the development of the nascent ESG ecosystem in India and help Indian enterprises and organizations integrate ESG into their core business and investment decisions. In doing so, the Centre shall contribute to the transition of businesses towards the future of capitalism defined by stakeholder orientation with a focus on long-term enterprise value, shared societal prosperity, and a sustainable relationship with the planet.

The incorporation of Environmental, Social and Corporate Governance goals as one of the core tenets of businesses across the globe was spurred in 2005 when the UN Secretary-General Kofi Annan rallied leading financial institutions of the world to evolve frameworks that embodied these metrics. Today, investors around the globe use non-financial ESG metrics along with traditional financial metrics to evaluate corporations, identify material risks and determine the future long-term financial performance of companies.

The ESG criteria are a set of non-financial performance indicators along the dimensions of environmental sustainability, social responsibility, and corporate governance embedded deep within the strategy and operations of the organization.

Recently, the Securities and Exchange Board of India (SEBI) also announced mandatory disclosures through the Business Responsibility and Sustainability Report (BRSR) for top 1000 listed companies, and the Stewardship Code for mutual funds and alternative investment funds. These regulations in addition to substantial interest from the investor community and changing consumption-preferences of society at large are steadily driving ESG conversations to the boardrooms of companies across multiple sectors in India.

Vision & Mission

CESGR aims to be a Centre of Excellence fostering sustainable and ethical organizations defining the future of responsible capitalism. It will focus on facilitating cutting-edge research and dialogue to improve the ESG performance of organizations while nurturing an ecosystem for stakeholder capitalism in India.

Centre Focus Areas

Driven by the mission statement, during its initial years of operation, the Centre shall focus on developing its capabilities in select areas of ESG integration - in line with global trends while being equally mindful of the contextual realities of India.

1. ESG Impact on Organizations: Materiality, Enterprise Value and Risk

A core focus area of CESGR will be to initiate and support empirically grounded research to contribute to the emerging state-of-the-art scholarship on how ESG factors impact organizations which includes — materiality assessment, impact on long term enterprise value, and overall risk profile of organizations.

2. ESG Reporting, Transparency, and Data Infrastructure

The ESG Centre will actively engage with multiple stakeholders to help develop the ESG data infrastructure, fine-tune the ESG measurement frameworks, reporting structures, and impact assessments methods to fit with the requirements of the Indian organizations.

3. ESG and Investment Stewardship

CESGR shall aim to develop an informative index of ESG performance that is empirically grounded and based on a deeper qualitative understanding of the operations and contextual factors for Indian enterprises.

4. ESG and Corporate Social Responsibility

The Centre shall support research and investigations to develop insights on linkages between the company’s CSR initiatives, associated performance along ESG dimensions, and evaluation of the impact on overall enterprise value and risk profile.

Centre Activities

Research and Insights

CESGR shall support research projects aligned with the core mission and focus areas. Research support could include competitive research grants, fellowships, and support for doctoral research. The Centre may also support data procurement and collection activities through surveys, interviews, and other electronic means to curate primary and secondary data to support research undertakings. A core research outcome shall be the development of an India specific ESG metric.

Advisory and Consulting

CESGR at IIMA will actively engage with companies, investors, and other organizations on short-term consulting projects and advisory services that leverage the core strengths and scholarship developed at the Centre. Advisory services will also include enterprise-level application of the metrics, methods, and frameworks developed at the ESG Centre.

Training, Outreach, and Knowledge Dissemination

CESGR will support the design and development of teaching and training materials including but not limited to case studies, simulations, multimedia content, and other novel pedagogical tools. The teaching content and material developed shall be used in teaching and learning programmes conducted by the Centre and its affiliates. CESGR will conduct periodic outreach and knowledge dissemination activities like expert webinars, public talks, and panel discussions. It will also conduct a flagship annual conference on ESG, with the goal to become a thought leader and an influential platform for sharing research, insights, and conversations among scholars, practitioners, policymakers, and the media.

Advocacy and Impact on Policy Design

The Centre will facilitate dialogue and knowledge sharing between the multiple public stakeholders in the country to help in evidence-based policy design and standards-setting for the ESG ecosystem in India.


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Research Spotlight


Busy Directors and Firm Life Cycle

Sakina H. Poonawala and Neerav Nagar

In this paper, we focus on the presence and effectiveness of busy directors. We propose that the presence and effectiveness of busy directors is associated with the life cycle stage of the firm. While firms in the introduction, growth and decline stages of firm life cycle are more likely to demand the services of busy directors as compared to the mature stage firms given the critical needs of such firms, busy directors may prefer to be on the boards of mature firms on account of the attached reputation benefits. We find evidence in support of the ‘supply side’ argument. We find that busy directors are less likely to be present in the introduction and growth stage firms as compared to the mature stage firms. We also find that the presence of busy directors is positively associated with firm performance in the growth and decline stage firms. Overall, we believe that a regulatory limit on the number of directorships held by a director is not a good idea. The directors are talented and knowledgeable enough to choose a firm and the amount of time and effort to exert.

Impact of Economic Cycles on the Use of Performance Measures in Executive Compensation: An Empirical Examination

Avinash Arya and Neerav Nagar

An extensive body of literature documents the central role played by management accountants in the development of performance measures. However, little research exists on the temporal evolution of performance measures in response to changes in the macroeconomic environment. This study examines the impact of economic cycles on the use of sales and income, two widely used performance measures, in executive compensation. We find that during normal periods income receives greater weight than sales in the Chief Executive Officer (CEO) compensation. When recession strikes firms reduce the weight on income but not on sales, resulting in an increase in relative weight on sales. Further investigations reveal that the cross-sectional variations in the weight on sales and income are conditioned by the life cycle stage of the firm. Growth and mature firms assign more weight to income during normal times and also reduce the weight on income most during recessionary period. In contrast, introductory firms increase weight on sales while decline firms leave weights on sales and income unchanged during recession. We also analyze the compensation of the Chief Sales Officer (CSO). Our results indicate that during normal periods both sales and income receive equal weight. However, during a recession the weight on sales rises significantly while the weight on income falls significantly. These findings indicate that the firms dynamically adjust the weights on sales and income in response to phases of economic cycles. To our knowledge, this is the first study to look at the impact of recession on the use of sales and income performance measures in executive compensation.

Pay Inequality and Firm Performance

Avinash Arya and Neerav Nagar

The rising pay inequality between CEO and rank and file employees has attracted considerable attention from the public, activists, regulators, and academic researchers. High CEO pay may incentivize employees to work hard for promotions and/or can help a firm attract talented CEO. Alternatively, high CEO pay may lead to inequity aversion and decrease employees’ work effort and/or signal rent extraction. We employ an advanced DuPont return on assets (ROA) decomposition to empirically test the predictions of these competing theories about the effects of pay inequality on firm performance. Using a sample of 1,321 Indian firms during 2017-2019 period, we find that pay inequality leads to better future performance as measured by the ROA, providing prima facie support for tournaments and talent assignment. However, an analysis of drivers of ROA reveals that the source of ROA improvement is better asset utilization (ATO). Further decomposition of ATO reveals that pay inequality leads to a significant decrease in labor productivity consistent with inequity aversion. Labor intensity increases significantly and is the sole driver of gains in asset utilization that in turn leads to ROA improvement. In other words, the observed improvements in ROA are simply the result of hiring more employees. Although it makes sense to hire more employees in an economy with low labor costs, it is hard to see as a reflection of executive talent.


State-owned banks and credit allocation in India: Evidence from an asset quality review

Abhiman Das, Sanket Mohapatra, and Akshita

This paper examines the role of state-owned banks' presence in allocation of credit to different sectors in India using the central banks Asset Quality Review (AQR) as a quasi-natural experiment. The AQR resulted in a larger increase in non-performing loans of state-owned banks as compared to other banks. We exploit the heterogeneity in the presence of state-owned and other banks across districts to identify the supply side channels for bank credit reallocation. Using a difference-in-differences analysis, we find that the top-third of districts based on presence of state-owned banks branches experienced a higher fall in the share of credit to the industrial sector in the post-AQR period compared to other districts. Such districts also experienced a greater increase in retail loans, which are considered less risky compared to industrial loans. Further, an analysis using a panel vector autoregression finds that the AQR, through an increase in non-performing loans of state-owned banks, led to a decrease in economic growth at the district-level. The results of this study suggest that central bank policy reforms can influence bank credit allocation at the sub national level and have real economy effects.

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Arun Duggal Centre for ESG Research (CESGR)