Mutual funds can launch five new categories under ESG scheme: Sebi
1 min read 20 Jul 2023, 07:21 PM ISTThe five new categories are -- exclusions, integration, best-in-class and positive screening, impact investing and sustainable objectives
PremiumThe Securities and Exchange Board of India (Sebi) on Thursday allowed mutual funds to introduce five new categories under ESG (environmental, social and governance) scheme.
According to the capital markets regulator, the mutual funds will also have to put in place a disclosure framework.
The five new categories are -- exclusions, integration, best-in-class and positive screening, impact investing and sustainable objectives.
Currently, mutual funds can launch only one ESG scheme under the thematic category of equity schemes.
These measures will facilitate green financing with a thrust on enhanced disclosures and mitigation of greenwashin, the regulator said in a circular.
The provision of a new category for ESG schemes will be applicable with immediate effect, the Sebi said.
With regards to disclosure requirements for ESG schemes, Sebi said mutual funds will have to clearly disclose the name of the ESG strategy in the name of the concerned ESG fund.
Mutual funds will have to make certain disclosure in their monthly portfolio statements of ESG schemes like security-wise BRSR Core scores and name of the ESG Rating Providers (ERPs) providing ESG scores, along with the ESG scores.
Sebi has mandated ESG schemes to invest at least 65% of assets under management (AUM) in listed entities, where assurance on the BRSR (Business Responsibility and Sustainability Reporting) Core is undertaken.
The balance AUM of the scheme can be invested in companies having BRSR disclosures. This requirement will be applicable from October 1, 2024.
In case there is a change in ERP, the reason for such change will also be disclosed in the next monthly portfolio statements of ESG schemes.
Under the rule, AMCs are required to make disclosures of votes cast on their website on a quarterly basis, along with the specific rationale supporting their voting decision.
In order to enhance transparency on votes cast by ESG schemes, the AMCs will have to categorically disclose whether the resolution has or has not been supported due to any environmental, social or governance reasons. The enhanced voting disclosures will be applicable from April 1, 2024, onwards.
(With inputs from PTI)
