Sebi proposes framework on ESG disclosures, ratings

Mumbai: India's capital markets regulator on Tuesday proposed a regulatory framework of ESG (environmental, social & governance) disclosures by listed entities, ESG ratings in the securities market and ESG investing by mutual funds. The move is aimed at facilitating balance among transparency, simplification and ease of doing business in an evolving domain.

The Securities and Exchange Board of India (Sebi) has mandated the top 1,000 listed companies by market capitalisation make filings as per the business responsibility and sustainability reporting (BRSR) from FY23.

In FY22, more than 175 companies reported on the BRSR framework, on a voluntary basis, the regulator said.


Sebi said the BRSR core has been developed for reasonable assurance which consists of select key performance indicators (KPIs) under each of the E, S and G areas. "The KPIs also incorporate metrics that are reflective of sustainable outcomes in companies. To illustrate, one of the metrics recommended by the committee is 'gross wages by gender' which is reflective of whether a company has gender diversity practices which attract and retain women in its workforce," the regulator said.

Under the 'S' parameters, attributes such as job creation, and inclusive development are considered. The 'G' parameters include openness or concentration of business, including related-party transactions.

ESG Ratings are generally assigned based on self-reported data by corporates, without any third-party assurance of such data. "Since investors are placing increased reliance on these ratings for making investment decisions, it is imperative that these ratings are reliable," Sebi said in a discussion paper.