Sambhav-2025

Approach In introduction, briefly highlight SEBI’s role in attracting FPI and ensuring market transparency and efficiency. Discuss SEBI’s 2024 reforms, including simplified registration, risk-based disclosures, FPI support, and same-day settlement, and their role in preventing round-tripping and illicit fund flows. Conclude suitably.

Introduction

The Securities and Exchange Board of India (SEBI) is driving the integration of Environmental, Social, and Governance (ESG) norms into corporate practices to enhance transparency, sustainability, and responsible investing. Through structured regulations and disclosure mandates, SEBI aims to ensure corporate accountability and promote long-term sustainable finance in India.

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SEBI’s Role in Integrating ESG Norms into Corporate Practices:

• Introduction of the BRSR Framework:
  • SEBI launched the Business Responsibility and Sustainability Reporting (BRSR) framework to standardize ESG disclosures across Indian companies.
  • Since FY 2022-23, the top 1,000 listed companies must report their ESG performance under this framework.
  • From FY 2023-24, third-party assurance is mandatory for ESG disclosures to improve data credibility.
• Easing ESG Compliance for Value Chain Partners:
  • Earlier, top 250 companies had to report ESG metrics for value chain partners covering 75% of their purchases or sales.
  • SEBI relaxed this rule, requiring disclosures only from partners contributing 2% or more to a company’s trade value.
  • The first year of reporting will be voluntary, reducing the compliance burden on smaller players.
• Regulating ESG Ratings and Disclosure Standards:
  
  • SEBI now mandates ESG rating agencies to register under Credit Rating Agencies (CRA) norms, ensuring more reliable ESG evaluations.
  • Companies are required to disclose assessed ESG data instead of undergoing costly third-party audits, reducing compliance costs.
• Combating Greenwashing with Stricter Norms:
  • SEBI introduced new disclosure rules for ESG mutual funds to prevent misleading sustainability claims.
  • At least 65% of ESG funds' assets must be invested in BRSR-compliant companies with assured disclosures.
  • Mutual funds must disclose their voting patterns on ESG-related resolutions for better transparency.
• Introducing Green Credits for Sustainable Companies:
  • SEBI recommended adding green credits as a leadership indicator in BRSR to reward environmentally responsible companies.
  • The Ministry of Environment, Forest, and Climate Change (MoEFCC) has already set methodologies for green credit calculations.

Impact of SEBI’s ESG Integration on Sustainable Finance:

• Encourages Responsible Investing:
  • Standardized ESG disclosures attract ethical and long-term investors who prioritize sustainability and social responsibility.
• Enhances Corporate Transparency and Governance:
  • BRSR mandates structured sustainability reporting, improving investor confidence in companies' ESG performance and long-term strategy.
• Aligns India with Global ESG Standards:
  • SEBI’s ESG mandates align India with global disclosure norms, making Indian markets attractive for foreign responsible investors.
  • Example: Similar ESG frameworks exist in the EU (Corporate Sustainability Reporting Directive - CSRD) and US (SEC ESG Rules).
• Reduces Greenwashing Risks in Sustainable Finance:
  • SEBI’s rules ensure companies do not falsely claim ESG compliance, strengthening investor trust and market integrity.
  • Example: Asset management companies (AMCs) are now required to invest transparently in ESG-compliant businesses.
• Encourages Long-Term Sustainable Growth:
  • Companies focusing on climate action, social responsibility, and ethical governance benefit from sustained capital inflows and positive public perception.

Conclusion

SEBI’s ESG regulations are transforming corporate sustainability reporting, ensuring greater accountability, investor confidence, and sustainable financial growth. By introducing BRSR, ESG rating regulations, and green credit incentives, SEBI is aligning India’s financial markets with global sustainability trends. This initiative not only strengthens corporate responsibility but also attracts ethical investments, making India a leader in sustainable finance and governance.