Managing the environmental, social and governance (ESG) impact of an entities functionality over various stakeholders is now a core responsibility that is no longer by chance or choice but by legal commitments. These commitments are more pronounced for larger entities, especially those that are listed and utilize public investments. The Securities and Exchange Board of India (SEBI) imposes various obligations on the entities it regulates to meet certain minimum ESG goals and report them in clear and concise manner to ensure transparency and maintain investor confidence while meaningfully utilizing the country’s resources. Corporate lawyers in India play a crucial role in advising companies on how to navigate these obligations which may broadly be categorized as under:

• Business Responsibility and Sustainability Report (BRSR) – This began with mandating the inclusion of Business Responsibility Reports in 2012 as part of the Annual Reports for top 100 listed entities. From the financial year 2022-23, top 1000 listed entities had to submit a Business Responsibility and Sustainability Report (BRSR) which was introduced in 2021. Entities were required to disclose their performance against the nine principles of the ‘National Guidelines on Responsible Business Conduct’ (NGRBCs). In 2023, BRSR Core was introduced as a sub-set of the BRSR, consisting of a set of Key Performance Indicators (KPIs)/metrics under 9 ESG attributes. It provided a framework for assurance and ESG disclosures for the value chain of listed entities.
• ESG Rating Providers (ERPs) – ERPs are regulated under the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 (CRA Regulations) as amended in 2023 that provides a broad framework for registration of ERPs, general obligation of ERPs, manner of inspection and code of conduct applicable to ERPs. Further, the procedural/disclosure requirements have been specified through a master circular issued in 2023.
• Listing Obligations and Disclosure Requirements – The above information i.e. BRSR and ESG Ratings are part of the disclosures under the SEBI (Listing Obligations and Disclosure Requirements) LODR Regulations. In addition, the director’s statement highlighting the relevance of sustainability to the organization and such other information are also mandatorily sought from listed entities under these regulations.
• Mutual Funds & AIFs – The concept of ESG investments was emerging and disclosures to enable investors to make informed investment decisions and to prevent greenwashing were deemed necessary. In this regard, SEBI, in 2022, prescribed disclosure norms for ESG schemes of Mutual Funds vide letters to AMFI, as available in the Master Circular on Mutual Funds dated May 19, 2023. In July 2023, SEBI introduced the ‘New category of mutual fund schemes for environmental, social and governance (ESG) investing and related disclosures by mutual funds’. Further, within the risk management framework, Asset Management Companies (AMCs) are obligated to continuously monitor ESG risks of investee companies. Similarly, SEBI has prescribed stewardship code for MFs and AIFs which requires monitoring and engaging in ESG matters of investee companies.

Fox Mandal’s ESG Compliance Support

A clear understanding of the scope and extent of the disclosure requires a qualified professional, typically a team of corporate lawyers in India, who are well-versed in the relevant reporting requirements and processes. It is equally important to establish core groups at each level to gather and compile accurate information to meet disclosure reporting obligations. This task is often handled by in-house corporate advocates.

Corporate law firms like ours also offer support in this area, including assistance with compliance reporting under other applicable statutes. Our corporate advocates remain up-to-date with SEBI’s evolving ESG compliance requirements, enabling us to effectively guide clients and ensure adherence to stringent standards.