Tyagi stressed the need for in-depth research on ESG norms with a focus on developing high quality, objective, content-specific rating matrices.
Markets regulator Securities and Exchange Board of India(Sebi) is in the process of putting in place disclosure for mutual fund schemes with the ESG (environment sustainability and governance) theme, its chief Ajay Tyagi said on Friday. Also, the regulator is examining the disclosure of ESG related aspects in the rating press release by credit rating agencies, he added.
Speaking at the inauguration of an ESG Centre for Research and Innovation at IIM Ahmedabad, Tyagi stressed the need for in-depth research on ESG norms with a focus on developing high quality, objective, content-specific rating matrices.
"Research in ESG can go a long way towards converting intangible and amorphous variables of business to measurable and quantifiable returns, both financial and social," he said. The Sebi chief also mentioned that there is a growing interest among Indian investors in ESG compliant companies and other investment products. Also, there is a growing market of ESG funds in the Indian mutual fund industry.
Asset management companies (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 fund of funds (FoF) in ESG space.
"However, these disclosures often do not bring out clearly all aspects related to ESG investing including investment strategy, usage of proprietary / third-party scoring in investment decision-making and monitoring of ESG investments. Sebi is in the process of stipulating disclosures specific to ESG schemes," he added.
Sebi came out with the consultation paper for introducing disclosure norms for ESG MF schemes in October, whereby it proposed various disclosures in the SID that will ensure that the type of strategy followed by the scheme, with regards to sustainability or ESG characteristics merit the nomenclature of an ESG fund.
The proposal requires schemes to only invest in securities that have business responsibility and sustainability report (BRSR) disclosures or equivalent in case of overseas securities. Link to BRSR disclosure or equivalent should be provided for each security.
(With inputs from PTI)