All stakeholders, particularly investors (such as private equity funds, venture capital funds, banks, and financial institutions) are looking towards going a step further to not just focus on monetary returns but also achieve positive social and environmental impact. The profound impact of COVID-19 has created a sense of urgency to switch focus to sustainable development. In fact, the State Bank of India (SBI) has formulated a policy on ESG-compliant lending to companies!

ESG Funds

As of today, there are only 2 asset management companies that are signatories to United Nations-supported principles for responsible investment (UN PRI) -SBI Mutual Fund & Kotak Mutual Fund 

The Indian market has 2 ESG funds worth $1 billion each has been announced by Quantum Investors and Avendus. At least, 17 mutual funds based on ESG already exist in the Indian market. Several big asset management companies (AMCs) such as Aditya Birla Sunlife, Axis Equity Fund, ICICI Prudential Fund, SBI Magnum, etc. have specific schemes based on ESG. 

AMCs have started launching equity schemes in the ESG space under the thematic category. The AMCs are also launching exchange-traded funds (ETFs) and ETF funds of funds (FoF) in the ESG space.

The market regulator has proposed that from October 1, 2022, asset management companies only invest in securities with BRSR disclosures. Schemes that invest in overseas securities could choose any global equivalent of the BRSR specified by the Association of Mutual Funds in India (AMFI).

ESG reporting

Forward-looking companies have already been disclosing their ESG performance in accordance with globally accepted frameworks like GRI, TCFD, and IR for several years.

Even as a matter of compliance, regulators are becoming more stringent by asking companies to act more responsibly. As a mandatory requirement, certain companies (based on market cap.) have been mandatorily asked to report as per the BRSR (erstwhile BRR).

Under the latest amendment, unlisted companies can kick off their ESG-reporting exercise as per the BRSR-lite format on a voluntary basis.

The following timeline gives a glimpse of how it has evolved over the years.