'Frustrating' demands placed on working group for ESG framework: Sebi’s Madhabi Puri Buch

Sebi's Madhabi Puri Buch pointed out that the backtesting results showed that out of all the data that was required for assurance of the core BRSR, 95 percent was either immediately available or reasonably available within the company.

The process of formulating the recently launched ESG framework--the Core Business Responsibility and Sustainability Report (BRSR)--was frustrating for the advisory panel headed by HDFC Mutual Fund’s Navneet Munot because of the demands placed on them, said Madhabi Puri Buch.

The Chairperson of the Securities and Exchange Board of India (Sebi) said that, at two crucial points when it looked like the framework was close to being ready, she sent the group back to the drawing board asking them to make the process simpler and to backtest the framework.

Buch was speaking at FICCI’s Capital Market Conference.

Also watch: Sebi Chairperson Madhabi Puri Buch speak about the regulator's commitment to ease of doing business and to transparency 

Buch said, “I remember the committee, headed by Navneet, was very frustrated with me because… in the first meeting I attended, I made them do a U-turn.”

The working group had listed around 800 mandatory parameters for disclosures and was thinking what other—100-odd--leadership parameters had to be made mandatory.

“I am like… are you crazy. I mean 800 is bad enough, now you want to make another 100 mandatory. I want to go in the reverse direction, I want you to reduce this to one dozen... that was the challenge that I had posed to the committee. I asked, what do you need that cannot be captured in one dozen parameters,” recalled Buch.

“Sure enough, the committee submitted its report and that was the birth of Core BRSR… where, in place of 800 parameters, there are only 41 remaining. That was the birth of a simplified version of ESG,” she said.

Then came the next challenge for the working group.

They were assured that it was a good plan and they were ready to submit it, when Buch asked, “Backtesting kidhar hain?” (Where is the data from backtesting?)

“So, we rely on data. If we cannot be sure that the policy that we about to make into law can actually be implemented, I am sorry I don’t sign (off on it),” said Buch.

“Again the committee was very frustrated… it took them 2-2.5 months to do the backtesting (in which 10-12 large corporates and some small corporates participated),”she added.

Buch pointed out that the backtesting results showed that out of all the data that was required for assurance of the core BRSR, 95 percent was either immediately available or reasonably available within the company.

Also read: We will not bring regulations not backed by data, says SEBI chief Madhabi Puri Buch

“Even the 5 percent that was not and was classified as difficult to get, after some discussion, it was assessed that that number was only 2-3 percent because some were only interpretation issues which we clarified,” she said.

“In short, our commitment to data remains. We do not and will not bring regulation into the market that is not backed by data,” said Buch.