The Securities and Exchange Board of India (“SEBI”) has issued a circular regarding new category of Mutual Fund schemes for Environmental, Social and Governance (“ESG”) Investing and related disclosures by Mutual Funds.
This circular has introduced a separate sub-category for ESG investments under the thematic category of Equity schemes. Any scheme under the ESG category shall be launched with one of the following strategies (details of strategies are at Annexure A) –
- Exclusion
- Integration
- Best-in-class & Positive Screening
- Impact investing
- Sustainable objectives
- Transition or transition related investments
It has been further decided that an ESG scheme must invest at least 65% of its AUM in companies which are reporting on comprehensive BRSR and are also providing assurance on BRSR Core disclosures.
Mutual Funds must disclose the name of ESG strategy in the name of the concerned ESG fund/scheme along with the following in their monthly portfolio statements of ESG schemes:
a) Security wise BRSR Core scores along with the BRSR scores.
b) Name of the ERPs providing ESG scores for the ESG schemes, along with the ESG scores.
Mutual Funds must also undertake a ‘Fund Manager Commentary’ along with the additional disclosures and obtain an independent reasonable assurance on an annual basis regarding their ESG scheme’s portfolio following the strategy and objective of the scheme, as stated in respective Scheme Information Documents.
The board of directors of AMCs, based on comprehensive internal ESG audit, shall certify the compliance of ESG schemes with the regulatory requirements including disclosures, in annual report of the scheme.
Click on the below link to have a detailed read of the circular.
Source : Securities and Exchange Board of India
