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India welcomes a new, balanced and comprehensive ESG regulatory framework

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Written

30.03.2023

Author

Valoris Stewardship Catalysts
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Source of reference

Outlook Planet
On March 29, 2023, and in an effort to facilitate a balanced approach to ESG, the Securities and Exchange Board of India (SEBI) approved the regulatory framework for ESG disclosures, ratings and investing and amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI (Mutual Funds) Regulations, 1996. The following table provides a summary of the key decisions made.
Aspect
Key decisions
Applicability
ESG Disclosures
  • Introducing the BRSR (Business Responsibility and Sustainability Report) Core, which contains a specific group of Key Performance Indicators (KPIs) for which listed entities need to obtain reasonable assurance.
  • Applicable to the top 150 listed entities (by market capitalization) for FY 2023-24, and then gradually extends to the top 1000 listed entities by FY 2026.
  • Applicable to the value chains of the top 250 listed entities (by market capitalization), to the disclosure requirement from the FY starting April 2024 and the assurance requirement from the FY 2025.
ESG Ratings
  • ESG Rating Providers (ERPs) need to consider India/Emerging Market parameters in ESG Ratings.
  • A regulatory framework for ESG Rating Providers in Securities Market will be introduced as a new chapter in the SEBI (Credit Rating Agencies) Regulations. This framework will enhance transparency in ESG rating rationales and introduce measures to mitigate conflict of interest by ERPs.
  • Assumed to have the same applicable dates as the above since EPRS need to provide a separate category of ESG Rating ‘Core ESG Rating’, based on the assured parameters under BRSR Core.
ESG Investing
  • ESG schemes need to invest at least 65% of AUM in listed entities that undertake assurance on BRSR Core. A new scheme category will be introduced to enable the launch of multiple schemes on ESG-related factors. 
  • Asset Management Companies (AMCs) need to obtain third party assurance on compliance with objective of the ESG scheme as well as enhance disclosures on voting decisions with focus on ESG factors.
  • Fund managers need to disclose commentary and case studies to show how the ESG strategy is applied to fund investments.
  • Ongoing
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