MUMBAI, Mar 30 (IFR) - India's market regulator has introduced ESG disclosures for listed companies and a regulatory framework for ESG rating providers.
The Securities and Exchange Board of India said the new disclosures, called the Business Responsibility and Sustainability Reporting Core, would be applied to the 150 top listed companies by market capitalisation from the coming fiscal year beginning on April 1 and would be gradually extended to the top 1,000 listed companies by the fiscal year ending in March 2027. The BRSR Core contains a limited set of key performance indicators for which listed entities should obtain reasonable assurance, Sebi said.
The new standard will also be applied to the supply chains of the top 250 listed companies, which will need to abide, on a comply-or-explain basis, to the disclosure requirement from the fiscal year starting April 2024 and the assurance requirement from the following fiscal year.
The market regulator said that ESG rating providers will be required to consider India and emerging market parameters, including environmental and social challenges, in their ratings and provide a "core ESG rating" based on the BRSR Core parameters.
The Sebi board also approved a regulatory framework for ESG rating providers, which proposes to enhance transparency based on the ESG ratings rationale, the mitigation of conflict of interests by rating providers, the facilitation of transition finance and the provision of ratings based on assured data.
In order to enhance transparency, prevent greenwashing and misselling of green securities, Sebi has mandated ESG schemes to invest at least 65% of assets under management in listed companies which have implemented BRSR Core.
Mutual funds will be allowed to introduce a new scheme category and to launch multiple schemes based on ESG-related factors. At present, a mutual fund can only launch one ESG scheme.
The extra flexibility is balanced by "greater emphasis on disclosures so that investors know exactly what they are putting their money into,",said Sebi chairperson Madhabi Puri Buch at a press conference on Wednesday.
Sebi has mandated third-party assurance and certification by the board of asset managers to comply with ESG objectives. It has also mandated enhanced disclosures on voting decisions with specific focus on ESG, fund manager commentary and case studies highlighting how ESG strategy is applied on the investments.
The Sebi board also gave in-principle approval to regulate index providers to ensure transparency, accountability in governance and administration of financial benchmarks in the securities market. It has barred domestic mutual funds from using foreign index providers that do not comply with domestic regulations.
Separately, the market regulator has allowed private equity investors to become sponsors of mutual funds. Currently, India only allows financial services firms and corporates to back mutual funds.
(Reporting by Krishna Merchant; Editing by Vincent Baby)
((@KrishnaMerchant email@example.com; +91 9833847353))
Story Id: 3826151
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.