INDIAN ACCENT

The ESG rating providers certified by Sebi have to now come up with models that take India's specific circumstances into consideration

- RICHA SHARMA

₹10,820 CRORE THE ASSETS UNDER MANAGEMENT OF ACTIVE ESG FUNDS

A COMPANY WITH investments in fossil fuels like coal and petroleum would certainly score low on ESG (environmental, social, and governance) parameters of any global rating provider. But an Indian ESG rating provider (ERP) may consider other factors at play, like the primacy of such fuels in a developing country.

Take coal as an example. It looks set to remain the primary source of energy for the next few years considering India's developmental needs. That may not be a valid consideration for a foreign ERP, but an Indian one is expected to take this into account.

Such considerations seem to have been the trigger behind the Securities and Exchange Board of India's (Sebi) decision in July 2023 to formulate a regulatory framework for ERPs. Recently, Sebi accorded ERP certification to players such as CareEdge, Stakeholders Empowerment Services (SES), ICRA, CRISIL, and a few more, including global ones. India is the first country to have such a regulatory framework for ERPs.

This follows other regulatory moves by Sebi to push companies to make sustainability a central tenet in their functioning. Earlier, Sebi had made it mandatory for the top 1,000 listed companies to make ESG disclosures in FY24. Starting FY25, the top 150 listed entities have to undertake reasonable third-party assurance as part of the Business Responsibility and Sustainability Report (BRSR) Core framework.