Introduction to SEBI's ESG Framework

The Securities and Exchange Board of India (SEBI) is spearheading the integration of Environmental, Social, and Governance (ESG) factors into India's financial markets. This initiative aims to enhance sustainability reporting and transparency across the corporate sector. Through a series of strategic measures, SEBI is setting the stage for a more accountable and sustainable investment environment.

Introduction of the BRSR Framework

A cornerstone of SEBI’s ESG strategy is the Business Responsibility and Sustainability Reporting (BRSR) framework. This framework introduces a comprehensive set of ESG metrics designed to standardize how companies report their sustainability performance.

• What is BRSR? The Business Responsibility and Sustainability Reporting (BRSR) framework provides a structured approach for companies to disclose their ESG activities and performance. It ensures transparency and comparability in sustainability reporting.
• BRSR Reporting Requirements: From the fiscal year 2022-2023, SEBI mandates the top 1,000 companies by market capitalization to report under the BRSR framework. Starting from FY 2023-2024, these reports will require third-party assurance to enhance credibility.

Facilitating ESG Reporting and Ratings

To streamline the ESG reporting process, SEBI has enabled ESG rating providers to register under the Credit Rating Agencies (CRA) norms. This step allows for the formation of an industry association that will collaborate with SEBI to develop a robust regulatory framework for ESG ratings.

• ESG Rating Agencies: By integrating ESG rating agencies into the regulatory framework, SEBI aims to enhance the accuracy and reliability of ESG evaluations, providing investors with clearer insights into corporate sustainability.

Combating Greenwashing with Enhanced Disclosure Norms

SEBI is also addressing the issue of greenwashing—a practice where companies exaggerate their sustainability claims. To mitigate this risk, SEBI has proposed expanded disclosure norms for ESG funds. Asset Management Companies (AMCs) will need to:

• Disclose Voting Patterns: AMCs must report their voting behavior on ESG-related resolutions to ensure transparency in their investment practices.
• Invest in BRSR-Compliant Companies: A minimum of 65% of their assets must be invested in companies that report under BRSR and provide assurance on their core ESG disclosures.

Encouraging Voluntary ESG Reporting

In a bid to promote voluntary ESG reporting, SEBI has published a list of over 175 companies that have voluntarily disclosed their BRSR reports for FY 2021-2022. These reports offer valuable insights into various ESG metrics, including:

• Greenhouse Gas Emissions
• Water Consumption
• Waste Generation
• Employee Health and Safety
• Diversity and Inclusion

Examples of BRSR Reports

To provide guidance and inspiration, here are links to some of the BRSR reports from leading companies:

1. Axis Bank
2. Bharat Forge
3. Tata Power
4. ICICI Securities
5. Dabur
6. L&T
7. Dr Reddy's
8. IOCL
9. ITC
10. Cipla

Global Trends and SEBI’s Role

SEBI's initiatives align with global trends towards enhanced ESG transparency and accountability. As worldwide investment practices increasingly emphasize ESG factors, SEBI’s framework helps Indian companies meet these standards and attract responsible investors who prioritize sustainability.

Conclusion: SEBI’s Impact on ESG in India

SEBI’s vision for ESG reporting in India represents a significant step towards greater corporate transparency and environmental stewardship. By implementing the BRSR framework and addressing greenwashing, SEBI is positioning Indian companies to succeed in a global market that values sustainability. Companies that embrace these changes not only comply with regulations but also gain a competitive edge in promoting their commitment to sustainability.

For further information on SEBI’s ESG initiatives and to explore how your company can align with these new standards, contact our team for a detailed consultation.