“Mauritius needs to have one regulator to oversee all the pieces of (ESG) regulations”

• CARE Edge Ratings in talks with local authorities for the sovereign ratings of Mauritius

Mandating ESG ratings in Mauritius would benefit investors interested in companies following ESG processes, states Mr. Najib Shah, Chairman of CARE Edge Ratings Limited. He added that this would enforce better ESG practices and provide assurance through validation by rating agencies. “Mauritius’ many connections with French investors, who are concerned about ESG regulations due to mandates in France, further emphasize the need for this structure,” he underscored in an interview with BIZWEEK amid his participation in the ESG Summit in Mauritius, which was co-hosted by CARE Edge Ratings and the Mauritius Institute of Directors (MIoD). 

You put the emphasis on the Loss and Damage Fund in your speech. Can you tell us more about it?  

There is a commitment which has always been there in the previous COPs. On the very first day of COP 28, there was an announcement and it seemed good that we were finally moving. The point I raised was that while it made good news, the amount given was not commensurate with the requirements. Estimates have been put forth that you require five hundred billion dollars, and you talk of seven hundred million. So, it’s a huge gap. All I was suggesting was that you need to have a match between your intent and your action.

CARE Edge Ratings is setting up a separate entity for ESG Ratings. Why is this initiative important?

The regulator in India, the Securities Exchange Board of India (SEBI), felt that the ESG assessment being done by any rating agencies has to be independent from the ratings being done other than for ESG purposes. They felt there could be a conflict of interest, and they have hence put forth regulations which say that an ESG rating company should be a separate entity regulated and managed separately. CARE Edge is already in the ESG space. We have done ESG reviews for more than a thousand companies in India. We are in the process of creating another company. We are expecting our license any time now, and the rating entity will focus only on ESG, as required and mandated by the regulator.

You stated that ESG rating should be mandatory in Mauritius. How will this be helpful?

If I am an investor wanting to invest in companies in Mauritius and I am conscious and aware of the requirements of ESG and its importance for humanity, I would like to invest in companies which follow ESG processes. As an investor, I would like it to be mandated simply because that will force the company to follow ESG processes, and then a rating agency will validate the fact that this company is indeed following ESG processes. What we have in Mauritius is several pieces of legislation. We need to have one regulator to oversee that all these pieces of regulations are working. This is why we are saying that Mauritius needs to have this. Mauritius has so many connections with French investors, and they are concerned about ESG regulations because it is mandated in France. It is good for everybody to have this structure.

CARE Edge Ratings is very well known in the field of company ratings, and it will now conduct sovereign ratings in Africa and other parts of the world, including Mauritius. Can you tell us more about this exercise?

We believe that it’s time for a rating agency other than the big three of the US to look at sovereign ratings. What do sovereign ratings do? Just like a rating for a company ensures cheaper finance, sovereign rating ensures cheaper finance from the financial institutions of the globe, the World Bank and the IMF. We believe that Africa has specifically been having a raw deal because there are several qualitative aspects which are being looked at rather than merely being data driven. We believe we can give you an alternative. It is for the institutions to accept it or reject it because every sovereign rating ultimately provides comfort to any lender to know that this country is not going to default. That’s what we’re looking at and working at. It’s a process which we have started. What we announced today (Editor’s Note: last Tuesday) was only to say that here we are in this space, we will come, we will make it public, get comments also to see whether we need to fine tune, because I’m sure there are a lot of other rating agencies in this space who will have a lot to say because that’s competition, and that’s competition which is required in my opinion.

When are you starting the process in Mauritius?

As soon as possible. I wouldn’t like to commit to any timeline because we need to talk to the Mauritian authorities. The regulators here also need to appreciate what we’re doing. We are pushing for this, impressing upon them the space we are entering into, and we’ll take this process forward thereafter.

How is the feedback so far?

I think that everybody is happy to know that there’s another agency willing to do this, and they’ll all be looking at what we’re going to come out with.

Last year we had the visit of Mr. Sanjeev Sanyal, member of the Economic Advisory to the Prime Minister of India, and he highlighted that all countries have always been rated by North Atlantic institutions. Referring to ESG, he expressed his surprise that a tobacco producer topped the ratings list. Can we have your views on the shifting landscape with regards to ratings?

It’s a strange, strange world we live in. I don’t want to mention names. You have car companies which are in the EV space, and they are directly contributing to environmental protection. But the same cannot be said about the Jeep, right? So we have challenges. It’s an interesting time we’re living in. Let us see how we fare because I’m sure you’ll have a lot to say when you see how we rate. But we are trying to make it as objective, as data driven as possible, with perceptions being reduced to a minimum, with no baggage of bias or of history.

How do you assess the ESG Summit which took place in Mauritius?

Wonderful. We really looked forward to it simply because this is the platform which brings in all company directors, government and regulators. It’s extremely important and I’m hopeful that this will be a permanent feature of the Mauritian regulatory landscape.

$ 5 bn is needed for the Loss and Damage Fund and $ 700 m is proposed. It’s a huge gap. You need to have a match between your intent and your action.