The Securities and Exchange Board of India (SEBI) has introduced new investment and disclosure rules for ESG funds, as reported by ESG Today on July 24. Under the new rules, ESG funds must ensure that at least 80% of their assets are invested in securities that align with their specific ESG strategies. Additionally, asset managers will be required to provide monthly ESG scores for their holdings in these funds. The SEBI also mandated that ESG funds clearly incorporate their ESG strategy in their names, and monthly portfolio statements must include both the Business Responsibility and Sustainability Report (BRSR) scores and the name of the ESG rating provider. These measures have been introduced to promote green financing by enhancing disclosures and mitigating the risk of greenwashing.

The new rules are part of the SEBI’s efforts to improve the reliability of ESG disclosures in the Indian market. Earlier on July 12, the SEBI released a regulatory framework on ESG disclosures by listed entities, ESG ratings in the securities market, and ESG investing by mutual funds. As per the framework, the top 150 listed entities by market capitalization will be required to publish BRSR starting from FY2023-24. Moreover, the SEBI will conduct a “reasonable” audit on a select set of indicators, known as core BRSR, for these top 150 companies, with plans to extend the audit requirements to the top 1,000 listed firms by FY2026-27. This regulatory move positions SEBI at the forefront of global regulators by imposing more stringent norms for ESG disclosures. Many other jurisdictions currently subject ESG disclosures to limited assurance, while SEBI’s approach of ‘reasonable’ assurance is more comprehensive and robust.

Sources:

https://www.esgtoday.com/india-announces-new-disclosure-investment-rules-for-esg-funds/

https://fintech.global/2023/07/24/sebi-unveils-robust-disclosure-rules-to-boost-green-financing-in-india/

https://www.bloomberg.com/news/articles/2023-07-13/sebi-leads-on-esg-reporting-audit-rules-for-top-companies

https://kpmg.com/in/en/home/insights/2023/07/firstnotes-sebi-framework-on-brsr-core-value-chain-disclosures-assurance-by-listed-entities-indicators.html