The market regulator has proposed that from October 1, 2022, asset management companies should invest only in securities disclosed in the Business Responsibility and Sustainability Report (BRSR).
In schemes for which there is no BRSR disclosure, the existing investment will be grand-parented by SEBI till September 30, 2023. In ESG investing, a fund manager chooses companies whose operations are considered socially responsible.
SEBI in a discussion paper on Tuesday said schemes investing in foreign securities can choose any global equivalent of BRSR as specified by the Association of Mutual Funds in India (AMFI).
Currently, these schemes fall under thematic sub-category. At least 80% of the total assets of the scheme are mandated to be invested in securities following the ESG theme. Therefore, these guidelines will be applicable only on the investment portion for ESG theme, Sebi said.
Sebi said asset management companies should try to keep higher proportion of assets under the ESG theme and make appropriate disclosures.
Globally, the concept of ESG investing is gaining popularity but there are no universal norms and standards.
Standard-setting bodies such as IOSCO (Organization of International Securities Commissions) and FSB (Financial Stability Board) are working towards standardized disclosure for ESG funds.
“While such standards have not yet emerged, in the meantime, there is a need to introduce disclosure norms for domestic ESG Mutual Fund Schemes In view of the increased activity in this sector,” SEBI said. “It is understood that these disclosure norms will further evolve and undergo changes based on learning and experience on both the domestic and international fronts.”