SEBI introduces Core BRSR ESG reporting, tackles unregulated ESG rating providers

Sebi said that access to the fund for selling securities during market dislocation will be to specified mutual fund schemes in proportion to the contribution made to the fund at a mutual fund level.

SEBI, the Securities and Exchange Board of India, has issued an ESG rating framework that aims to encourage sustainable development and corporate responsibility.

In its latest board meeting, SEBI has introduced a novel ESG reporting called Core Business Responsibility and Sustainability Reporting (BRSR) and has also formulated specific measures for ESG investing.

SEBI has expressed concern about the activities of unregulated ESG rating providers (ERPs), which may lead to larger concerns about issues of investor protection, market efficiency, risk pricing, capital allocation, and greenwashing.

To address these concerns, SEBI has introduced the concept of Core BRSR reporting, which mandates 49 parameters for ESG reporting, down from 800 previously.

Chairperson Madhabi Puri Buch emphasised that all proposals were co-created by the market and were backtested with ten large conglomerates before being laid down.

SEBI's advisory committee on ESG issues recommended that ERPs be permitted to provide a Core ESG rating based on assured indicators, while additional commentary or outlook on unverified or unassured data may be provided.

“By extending ESG disclosure and assurance requirements to the value chain of listed entities, SEBI's balanced framework is a game-changer for Indian businesses. Introduction of BRSR Core will increase transparency and ensure reliable ESG disclosures along with considering India's unique environmental and social challenges while determining ESG ratings and investments.” said Pratiq Shah, Partner, Deloitte India.
On ESG investing:

SEBI also introduced a number of new measures to ensure that the risk of mis-selling and greenwashing is addressed. Some of them are:

• Mandating ESG schemes to invest at least 65% of AUM in listed entities where the assurance on Core BRSR is undertaken.
• Mandating third-party assurance and certification by the board of AMCs on compliance with the objective of the ESG scheme.
• Mandating enhanced disclosures on voting decisions with a specific focus on ESG factors.
• Mandating disclosure on fund-manager commentary and case studies which inter-alia highlight how the ESG strategy is applied to the fund/investments.
• Introducing a new scheme category that enables the launch of multiple schemes on ESG-related factors.