The Securities and Exchange Board of India (SEBI) has released a consultation paper on requiring large firms to provide greater assurances on their ESG reporting.
According to ESG Today, large Indian firms may be required to provide assurances on their ESG reporting and supply chain-level ESG disclosures, while ESG investing funds will face tighter portfolio and stewardship criteria.
SEBI noted in the paper that there is a ‘growing recognition of the significant economic and financial impact of climate change and ESG risks’. This has led to the launch of ESG funds and calls by investors and regulators for ESG-related disclosures.
The regulator has also proposed ESG disclosures according to the BRSR Core for the top 250 companies on a comply-or-explain basis beginning in 2024, with assurance beginning the following year.
SEBI’s consultation paper also provided a series of proposals to expand disclosure for ESG funds and other measures to boost transparency. Such proposals include providing better clarity on votes cast on resolutions at AGMs and providing case studies on stewardship activities including reporting on engagements and outcomes aligned with the objectives of the fund.
Other proposed rules for ESG funds include having at least 65% of AUM invested providing assurance on BRSR Core disclosures, with the remaining assets in companies reporting on BRSR, providing third-party assurance that the portfolio is in compliance with its stated strategy or objective, and a mandated internal ESG audit to ensure that funds’ Scheme Information Documents, Stewardship Reporting, and Responsible Investment Policy documents are accurate.
The regulator has also called for rules for fund names, and that funds provide yearly manager commentary highlighting factors such as how the ESG strategy is being applied and how engagements are carried out.
SEBI is seeking comment on the proposals until March 6, 2023.
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