India Capital Growth Fund

Sustainability and Environmental, Social and Governance (“ESG”)

The Board recognises its responsibilities for reporting on ESG and intends to progress towards compliance with the Listing Requirements to report on the four pillars of Governance, Strategy, Risk Management and Metrics & Targets with the assistance and support of the Investment Manager, upon whom the Board is reliant to deliver this ESG reporting of the Company.

In setting and reporting on our ESG policies, we have considered the impacts of our activities and followed the relevant regulatory guidance including the requirements of section 172(1) of the Companies Act 2006 and, in so far as they apply, the non-financial reporting requirements in sections 414CA and 414CB of the Companies Act 2006. Although India Capital Growth Fund does not fall within the scope of these two sections, we believe that these disclosures will provide shareholders and stakeholders with a greater level of insight and transparency. We have also reported under the UK Corporate Governance Code (“UK Code”).

We believe in engagement and long term ownership both in respect of our own shareholders and the investment approach adopted by our Investment Manager, to drive investment performance and to contribute to positive change to build a sustainable future. We and our Investment Manager believe that companies with strong management focus on ESG have the potential to reduce risks facing their business, thereby delivering sustainable performance and enhanced returns over the longer term.

Investment management approach to sustainability & ESG

The management of sustainability risks forms an important part of the due diligence process implemented by the Investment Manager. When assessing the sustainability risks associated with underlying investments, the Investment Manager is assessing the risk that the value of such underlying investments could be materially negatively impacted by an environmental, social or governance event or condition. Sustainability risks are generally incorporated into the Investment Manager’s evaluation of an issuer’s investment risk or return, across all asset classes, sectors, and markets in which the Company invests.

The Investment Manager believes that sound governance is an essential element of a company’s long term sustainability and growth, and that detailed analysis beyond financial data is required to understand the true characteristics of a potential underlying investment. This includes, but is not limited to, conviction in the alignment of interest between the owners, managers and minority shareholders of a business, the nature and extent of the true independence of the Board and its specialist sub-committees, capital allocation and dividend policies, tax treatment, key man risk and succession planning. Governance plays a central role in the investment philosophy of the Investment Manager and it naturally veers away from certain sectors where practical issues of “getting business done” within India can undermine good governance. These sectors, including those such as Real Estate, Public Sector Banks and Infrastructure Projects, tend to be capital intensive, rely on multiple bureaucratic approvals for authorisation and are often cash flow negative. The Investment Manager also will not consider investments in industries that are considered harmful to the wellbeing of society not least because they may not demonstrate adequate compliance with regulations and tax considerations may create unforeseen financial uncertainty. These include tobacco, alcohol, gambling and defence equipment manufacturers of all descriptions.

The Investment Manager gives equal importance to the non-financial elements of environmental and social issues of a business and financial modelling when considering a company for an underlying investment. These include, but are not restricted to, topics such as gender diversity, environmental impact on production, carbon footprint, workplace health and local community engagement. Where the sustainability risks associated with a particular investment have increased beyond the ESG risk appetite of the Company, the Investment Manager will consider selling or reducing that exposure to the relevant investment, taking into account the best interests of the shareholders of the Company. The Investment Manager does not use third party ESG ranking tools but has integrated the systematic and explicit inclusion of material ESG factors into its investment analysis process from which it is developing its own bespoke ESG ranking tool. These factors include:


  • GHG emissions
  • Planned carbon neutrality goals
  • Energy management
  • Water and wastewater management
  • Waste and hazardous materials management
  • Biodiversity & land use


  • Related party transactions
  • Promoter’s behaviour: % holding, % shares pledged, exposure to other business, unlisted entities in similar business, remuneration, family run vs. professionally run
  • Board structure: diversity, independence and size
  • Board Committees and their independence: Audit, Nomination and Remuneration
  • Capital allocation decisions
  • Management of legal & regulatory environment
  • Business ethics
  • Competitive behaviour


  • Fulfilment of responsibilities under Corporate Social Responsibility requirements
  • Human capital: employee turnover, health & safety, training & diversity, treatment of blue collar workers
  • Human rights and community relations
  • Customer privacy and data security
  • Access and affordability
  • Product quality and safety
  • Supply chain management
  • Customer welfare
  • Selling practices and product labelling

Additionally, as part of its commitment to ESG & sustainability in its investment approach, the Investment Manager has appointed a dedicated ESG co-ordinator to implement its ESG investment strategy.


In order to truly understand the direction of travel and the actions being taken by portfolio investment companies in respect of ESG and the sustainability of their business, constructive dialogue with management is at the core of the investment process of the Investment Manager. The investment advisers in India meet and interact regularly with both investee companies and potential portfolio holdings. They meet onsite where possible and will take the opportunity of visiting manufacturing facilities as well a corporate headquarters in order to build a clearer picture. In addition they also endeavour to meet employees outside of the senior management team, as this also helps to strengthen the overall understanding of the business and better establish if the ESG and sustainability ethos projected by senior management filters down through the business.

Voting on portfolio investments

The Investment Manager has been empowered to exercise discretion in the use of its voting rights in respect of portfolio investments. Where practicable, all shareholdings were voted at all investment company meetings which backs up and reinforces engagement and integrates sustainability issues into the voting process.

Holdings in individual companies are not large and our votes are not likely to carry weight. However as responsible investors, and due to our remit to invest in small and mid-cap Indian equities supported by a long term investment approach, management teams do look to us for guidance on aspects of best practice. In turn we look to influence their thinking positively in respect of ESG matters.

United Nations-backed Principles of Responsible Investment Initiative (PRI)

As part of its commitment to responsible investing, the Investment Manager is a signatory to The United Nations-backed Principles for Responsible Investment Initiative (PRI).