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SEBI has permitted fund houses to issue multiple thematic ESG schemes.
Explaining the rationale, the market regulator said in a circular, “In view of the industry representations for allowing multiple schemes with different ESG strategies and considering the increasing need for green financing, it has been decided to permit launch of multiple ESG schemes with different strategies by mutual funds,”
It has introduced six thematic sub-categories and directed the fund houses to ensure ESG schemes align with any one of these strategies i.e. exclusion, integration, best-in-class & positive screening, impact investing, sustainable objectives, transition or transition related investments.
Notably, the market regulator had earlier issued a consultation paper in this regard.
Additionally, to improve transparency and mitigate risks of mis-selling and greenwashing, SEBI has laid down guidelines in the said circular.
Here is the gist of these guidelines. For the complete circular click here.
- With effect from October 1, 2024, ESG schemes to invest at least 65% in companies reporting on comprehensive BRSR (Business Responsibility and Sustainability Reporting) and providing assurance on BRSR core disclosures. The remaining AUM can be invested in companies having BRSR disclosures
- These schemes to disclose the name of the strategy in the name of the fund. For example, XYZ ESG Exclusionary Strategy Fund, ABC ESG Best-in-class Strategy Fund, etc
- Monthly portfolio statements to carry security-wise BRSR core scores and BRSR scores along with the name of ESG Rating Provider (ERP) and ESG scores. Reason for change in ERP, if any to be disclosed in the next monthly portfolio statement. These regulations are applicable with immediate effect
SEBI has also laid down regulations on voting disclosures, annual fund manager commentary, disclosure of case studies and assurance of ESG schemes.
