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ESG Disclosures, Ratings and Investing

On February 20, 2023, SEBI published an “ESG Disclosures, Ratings, and Investment” consultation document to gather public input on the regulatory framework for listed companies’ ESG disclosures, the securities market’s ESG ratings, and mutual funds’ ESG investments.

The top 1000 publicly traded firms (ranked by market capitalization) must begin disclosing ESG information starting 2021-22 and making it mandatory starting 2022-23. In addition, AMFI has enforced disclosures for mutual funds with ESG labels, and SEBI is creating a regulatory framework for ERPs.

The ESG Advisory Committee (EAC) developed the BRSR Core for reasonable assurance, which consists of Key Performance Indicators (KPIs) under nine attributes/areas that need to be reasonably assured.

SEBI is developing a regulatory framework for ESG Rating Providers (ERPs). The EAC has identified fifteen ESG parameters that may be integrated into at least one of the ESG ratings for an Indian company. In addition, ERPs must provide a Core ESG rating based on verified information/reports.

ESG schemes must use AMFI-empaneled ERPs and publish securities-wise and scheme-wise scores in monthly portfolio disclosures. They must also disclose the name of the ERP alongside the score disclosures to help investors make informed investment decisions.