Market Regulator in India to Simplify BRSR and ESG Rating Regulations

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by KnowESG
Picture of India's market regulator planning to simplify regulations for businesses on environmental, social and governance (ESG) ratings.

The Securities and Exchange Board of India (Sebi) wants to make the framework for the Business Responsibility and Sustainability Report (BRSR) easier to understand and set up a road map for auditing and evaluating environmental, social, and corporate governance (ESG).

Sebi Chairperson Madhabi Puri Buch says that these changes will be based on the suggestions of an ESG regulations committee set up by the capital markets regulator.

Buch, speaking at a conference organised by the National Productivity Council, stated that in international forums, Sebi has been debating the need for growing nations such as India to have an independent stance on ESG issues in addition to global standards.

“It is critical to converting intensity on a purchasing power parity basis in the energy market,” she said.

The BRSR is currently benchmarked against global standards. However, Sebi believes that there should also be an emphasis on what is important for Indian markets.

“We will follow the global alignment, along with adapting our metrics and reporting, to have a narrative for the energy markets based on what is relevant and material to our markets,” said Buch.

The market regulator is also finalising legislation for an ESG rating methodology to ensure full disclosure and avoid greenwashing. Every organisation will receive a score from ESG rating providers.

Because the ESG field is still evolving and defined goals have not yet formed in global economies, the Sebi chair stated that disclosures, structure, and assurance in the segment are critical, particularly for mutual funds.

These ratings would help mutual funds with ESG themes make investment decisions. Currently, nine fund houses have ESG thematic programmes, with SBI Mutual Fund managing the most assets under management (approximately Rs 4,700 crore).

“There is a need to maintain the independence of our carbon credits. It is not desirable that there be a single price for carbon credits across the globe. Developed economies should assist emerging economies, and there should be a just transition,” she added.

In January this year, Sebi produced a discussion paper suggesting products such as ESG Corporate Risk Ratings, ESG Financial Risk Ratings, and ESG Impact Ratings.

“Mandate on ESG disclosures will ensure data availability—a key challenge faced when it comes to the assessment of ESG performance. Data availability will enable assessing ESG risks as well as monitoring the same in the investment portfolio,” said Rama Patel, director, CRISIL Ratings.

Globally, in February, the European Securities and Markets Authority (ESMA) issued a consultation paper on ESG rating providers operating in the European Union (EU), and in July 2022, Japan's Financial Services Agency (FSA) issued a draft code of conduct for ESG Evaluation and Data Providers for public comment.

For more regulatory news

Source: Business Standard


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