What’s in the Latest BRSR Recommendations from SEBI
As part of their listing disclosure requirements, top-listed entities in India are now required by the Securities and Exchange Board of India (SEBI) to report their Business Responsibility and Sustainability Report (BRSR). SEBI has also established regulations for ESG-labelled Mutual Funds, which require them to primarily invest in companies that release BRSR reports. Furthermore, SEBI recently revised the regulatory guidelines for green bond issuers, making it mandatory for them to adopt a condensed version of the BRSR report – BRSR Core. In addition, SEBI is presently developing a regulatory framework for ESG Rating Providers (ERPs).
As India’s top 1000 companies gear up to adopt and publish the first set of mandatory BRSR reports, SEBI released its ESG Committee’s recommendations on streamlining ESG disclosures, ratings, and investments in India on 20th February 2023.
These recommendations aim to improve the quality of BRSR disclosures to build reliance on the information disclosed. The highlights of the recommendations that increase the scope, functional value, and quality of BRSR are as follows:
BRSR Core Assurance: For BRSR disclosures to be trusted, it is essential to have third-party assurance. The BRSR Core focuses on crucial disclosures that require assurance, such as greenhouse gas emissions, water usage and discharge, research and development, capital expenditure for reducing environmental impact, waste management, employee safety and well-being, gender diversity, POSH (Prevention of Sexual Harassment) complaints, procurement from micro, small, and medium enterprises (MSMEs), job creation in tier-3 towns, percentage of negative media coverage, average payment days to vendors, and business transparency.
Upgrade to BRSR Comprehensive Framework: The committee proposed amending the BRSR comprehensive framework and including additional KPIs suggested in the BRSR core, with reasonable assurance required from an assurance provider for such KPIs.
Essential Supply Chain Disclosures: Significant GHG emissions need to be captured in the supply chain, making it essential for certain companies to report the same. This disclosure will be rolled out gradually on a “comply basis.”
Indianized ESG Rating Scores: There is a need for a distinct set of metrics to consider when assigning ESG ratings in emerging markets like India. The committee identified 15 relevant ESG parameters that have an Indian context.
BRSR Core Ratings: ERPs shall provide a Core ESG rating, which shall be based on assured BRSR Core parameters, in addition to their general ESG ratings.
Mitigation of Investment Risks: SEBI committee has proposed an ESG scheme to invest at least 65% of its AUM in companies that are reporting the BRSR Comprehensive version and providing assurance on BRSR Core disclosures. Third-party assurance for the ESG funds regarding compliance shall be introduced from April 01, 2023, on a “comply-or-explain” basis.
The adoption of BRSR reporting is not simply a routine compliance measure but has a broader influence and a significantly broader audience. Through this consultation paper,
SEBI’s ESG committee has alerted listed companies that will be issuing their initial BRSR report for the financial year 2022-23.
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