India sets course for enhanced ESG disclosure and assurance
The Securities and Exchange Board of India (SEBI) has constituted a new advisory committee on environmental, social and governance (ESG) matters in the securities market. It is drawn from a wide range of stakeholders, including preparers of sustainability reports; users such as mutual funds, asset managers and insurance companies; ESG ratings providers, proxy advisers and credit rating agencies; assurance providers; and other technical experts.
The committee seeks to address three key themes. It will consider enhancements to the Business Responsibility and Sustainability Report (BRSR), including the development of sector-specific disclosure requirements, India-specific metrics, and value chain-related disclosures. It will also identify areas for assurance on the BRSR, and develop a roadmap to implementation.
In the sphere of ESG ratings, areas of focus include the ‘S’ of ESG with metrics such as employment generation, governance indicators that could feed into ESG and credit ratings, and disclosures on rationale by ESG ratings providers revealing what qualitative factors they have used and how. On ESG investing, the committee is tasked with ensuring ongoing enhancement of ESG disclosures. “The evolution of standards and norms for ESG is a dynamic process which necessitates continuous evaluation,” notes SEBI. The committee will consider both the possible introduction of prudential requirements for ESG funds, and mandatory ESG disclosures for all mutual fund schemes in the longer term.
XBRL is very well embedded in business reporting in India, and we have previously noted that XBRL is the preferred format for BRSR disclosures to enable integration and comparison with other types of data. The committee’s work may well therefore bring interesting new digital reporting requirements, and we trust and anticipate that we will see a digital-first approach as these are developed.
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