Sebi extends deadline for comments on disclosure norms for MF schemes with ESG theme

Sebi on Tuesday extended the deadline till December 1 for submission of comments on proposed disclosure norms for mutual fund schemes with the ESG (environment sustainability and governance) theme. The proposed measures are aimed at ensuring that ESG-focused mutual fund schemes remain true to label.

The markets regulator came out with the consultation paper for introducing disclosure norms for ESG mutual fund schemes on October 26 and sought comments on the same by November 16. In a notice on Tuesday, Sebi said "it has been decided to extend the timeline for submission of comments to December 1, 2021".

In its consultation paper, the regulator proposed various disclosures in the Scheme Information Documents (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.

Though the mandated allocation for securities with ESG theme is at least 80 percent and the disclosure norms apply to these securities only, the regulator has proposed not too much deviation from the scheme philosophy for the remaining 20 percent allocation. The regulator suggested that investments should be designed to generate a beneficial ESG/sustainability impact alongside a financial return.

It proposed additional disclosure to monitor and evaluate the investments and ensure they encompass investment strategies to meet the standards of ESG investments. It also suggested periodic portfolio disclosures to keep the investors appraised of their investments.

In India, and on September 2021, there were eight ESG Thematic equity schemes with assets under management of Rs 12,085 crore. There is one ESG ETF and one ESG ETF Fund of Fund with an asset base of Rs 174 crore and Rs 144 crore, respectively.