The Securities and Exchange Board of India (SEBI) has taken several decisions with an aim to protect the interest of investors.
The SEBI's decisions cover norms related to environmental, social and governance (ESG), secondary market, mutual funds, and shareholder empowerment.
The regulator took the decisions in its board meeting yesterday.
Following are the key highlights:
ESG RELATED
The board approved the regulatory framework for ESG disclosures, ratings and investing and amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and SEBI (Mutual Funds) Regulations 1996 to facilitate a balanced approach to ESG.
ESG Disclosures
To enhance the reliability of ESG disclosures, the regulator will introduce Business Responsibility and Sustainability Report (BRSR) Core. This will contain a limited set of key performance indicators, for which listed entities will need to obtain reasonable assurance.
The BRSR Core will be applicable initially for top 150 listed entities (by market capitalization) from FY24 and gradually extended to the top 1,000 listed entities by FY27.
To introduce ESG disclosures and assurance (BRSR Core only) for the value chain of listed entities, with certain thresholds, in order to increase transparency. This will be applicable to the top 250 listed entities (by market capitalization), on a comply-or-explain basis from FY25 and FY26, respectively.
ESG Ratings
ESG rating providers (ERPs) will be required to consider India/emerging market parameters in ESG ratings. There won’t be any constraints on their issuing other/additional ratings as required by their clients.
ERPs will offer a separate category of ESG Rating called as ‘Core ESG Rating’, which will be based on the assured parameters under BRSR Core in order to facilitate the credibility of ESG ratings.
ESG Investing
Mandating ESG schemes to invest at least 65% of assets under management (AUM) in listed entities, where assurance on BRSR Core is undertaken.
Mandating third-party assurance and certification by board of asset management companies (AMCs) on compliance with objective of the ESG scheme.
Mandating enhanced disclosures on voting decisions with specific focus on ESG factors.
Mandating disclosure of fund manager commentary and case studies, which among others, highlight how the ESG strategy is applied on the fund/investments.
Introducing a new scheme category, enabling the launch of multiple schemes on ESG-related factors.
Regulatory Framework For ESG Rating Providers
The board approved the proposals on introduction of a regulatory framework for ESG rating providers in the Indian securities market, and related proposals on:
Enhanced transparency in ESG rating rationales.
Measures to mitigate conflict of interest by ERPs.
Facilitating augmentation of transition finance in India.
Facilitating ESG ratings based on assured data.
SECONDARY MARKET RELATED
ASBA Like Facility For Trading In Secondary Market
The board approved the broad framework for Application Supported by Blocked Amount (ASBA) like facility being made available to investors for secondary market trading.
The facility is based on blocking of funds for trading in secondary market through unified payments interface (UPI), an instant real-time payment system. The facility will be optional for investors as well as stock brokers.
The framework would be implemented in a phased manner to facilitate smooth transition in the market.
Regulatory Framework For Index Providers
The board in-principle approved a proposal to regulate index providers with the objective of fostering transparency and accountability in governance and administration of financial benchmarks in the securities market.
SHAREHOLDER EMPOWERMENT RELATED
Amendments To LODR Regulations
The board approved the several amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations in order to bring more transparency and to ensure timely disclosure of material events or information by listed entities, as well as to strengthen corporate governance.
Disclosure of material events or information by listed entities
Introduction of a quantitative threshold for determining ‘materiality’ of events/information.
Stricter timeline for disclosure of material events/information for which decision has been taken in the meeting of the board of directors (within 30 minutes) and which are emanating from within the listed entity (within 12 hours).
Market rumors to be verified and confirmed, denied or clarified, as the case may be, by top 100 listed entities by market capitalization effective from 1 October 2023 and by top 250 listed entities with effect from 1 April 2024.
Disclosure for certain types of agreements binding listed entities.
Strengthening corporate governance at listed entities
Periodic shareholders’ approval for any special right granted to a shareholder of a listed entity to address the issue of perpetuity of special rights.
Strengthening the extant mechanism of sale, lease or disposal of an undertaking of a listed entity outside the ‘Scheme of Arrangement’ framework.
Periodic shareholders’ approval for any director serving on the board of a listed entity to do away with practice of permanent board seats.
To read the SEBI’s entire decisions, click here.
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