Before going for the initial public offering for Life Insurance Corporation of India (LIC), the government is planning to get an ESG (environment, social, and governance) score for the insurance behemoth, a report by Economic Times revealed.

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The move comes at a time when market regulator Securities Exchange Board of India (Sebi) is examining regulatory and supervisory approaches for ESG issuers.

Here are all FAQs about ESG score answered:

What is an ESG score?

The ESG score measures a company's performance in these three aspects -- environmental, social, and governance. The score measures long-term risks in issues such as energy efficiency, worker safety, and board independence, which also have financial implications.

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Investors are increasingly evaluating companies in which they might want to invest based on these criteria. Under the environmental aspect, the score weighs the company’s performance as a steward of nature. Social factors include relationships with employees, customers, suppliers, and the communities where it operates. Under governance, the score measures the company’s pay, audits, internal controls, leadership, and shareholder rights.

Why is govt working on ESG ranking?

The Centre is working on ESG ranking for LIC before the IPO to give a clear message to investors that the insurance giant is better placed to judge risks and opportunities in the future, Economic Times reported.

"LIC could be the largest issue from the government for some time in the future and therefore, it has to comply with all the existing and expected regulations," ET quoted a source as saying.

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A company with a high ESG score is considered to be better able to anticipate future risks and opportunities and is more focused on long-term value creation.

How does ESG help companies gain a dedicated pool of investors'?

Both institutional and independent investors are considering the ESG score to identify companies that comply with inclusive growth factors and give good returns. Many asset managers are using the score to reflect on healthy profits.

"An ESG tag helps gain a dedicated pool of investors as it is now a globally accepted benchmark for fundraisings," Economic Times quoted Suvajit Ray, executive vice president at IIFL Securities, as saying.

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Which companies have reported ESG scores?

Some of the world’s biggest companies mix profitability with ethical and social responsibility and report their ESG score. These include Microsoft, Linde, Accenture, Salesforce, Infosys, Mindtree, TCS, Wipro, Kotak Mahindra Bank, and Coal India.

When is the LIC IPO?

The LIC public issue is touted to be the biggest ever IPO to hit Dalal Street. The government, which holds a 100 percent stake in the insurance giant, may dilute a 10 percent stake, media reports said earlier. The issue is likely to value the insurance giant at around $110 billion.

LIC is planning to file its draft prospectus for the initial public offering in January, as per reports by The Times of India. The government plans to float the public issue by the end of the ongoing fiscal.

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Government officials have been in talks with long-term global investors before the mega IPO. It has employed 10 banks to manage the issue, including Goldman Sachs, Kotak Securities, Citi, Axis Capital, Bank of America, JP Morgan, JM Financial, ICICI Securities, Nomura, and SBI Capital Markets.

(Edited by : Jomy Jos Pullokaran)