SEBI Meet: Nod to regulatory framework for ESG disclosures
News from Web 30-Mar-2023
The Securities and Exchange Board of India (SEBI) on Wednesday approved the regulatory framework for ESG (Environmental, Social and Governance) disclosures, ratings and investing.
The board gave its consent to the amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and SEBI (Mutual Funds) Regulations, 1996, for facilitating a balanced approach to ESG.
On ESG Disclosures, the market regulator has mandated introduction of BRSR (Business Responsibility and Sustainability Report) Core to enhance the reliability of ESG disclosures. The BRSR will contain a limited set of Key Performance Indicators (KPIs), for which listed entities will be required to obtain “reasonable assurance”, a SEBI release said.
“A glide path is prescribed for applicability of BRSR Core, beginning with the top 150 listed entities (by market capitalization) from FY 2023–24, which shall be gradually extended to the top 1,000 listed entities by FY 2026-27,” the SEBI release said.
The requirements of disclosure and assurance will be applicable to the top 250 listed entities (by market capitalization), on a comply-or-explain basis from FY 2024-25 and FY 2025-26, respectively.
ESG Ratings
Under the regulatory framework, the ESG Rating Providers (ERPs) will be required to consider India/emerging market parameters in ESG Ratings, considering that emerging markets have a different set of environmental and social challenges.
On ESG Investing
SEBI rules also underline measures to address the risk of mis-selling and greenwashing to promote ESG investing. ESG Schemes will be required to invest at least 65% of AUM in listed entities, where assurance on BRSR Core is undertaken, the release said.
The Asset Management Companies (AMCs) are mandated to take third party assurance and certification by the board of AMCs on compliance.
The AMCs will also be required to make enhanced disclosures on voting decisions with specific focus on environmental, social and governance factors along with disclosures of fund manager commentary and case studies, which highlight how the ESG strategy is applied.
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