CAPITAL markets regulator SEBI on Thursday allowed mutual funds to introduce five new categories under ESG (environmental, social and governance) scheme and put in place a disclosure framework for them. The five new categories are -- exclusions, integration, best-in-class and positive screening, impact investing and sustainable objectives. Presently, mutual funds can launch only one ESG scheme under the thematic category of equity schemes. The provision of a new category for ESG schemes will be applicable with immediate effect, the Securities and Exchange Board of India (SEBI) said in a circular.

 

The regulator said these measures will facilitate green financing with a thrust on enhanced disclosures and mitigation of greenwashing. SEBI has mandated ESG schemes to invest at least 65 per cent of assets under management (AUM) in listed entities, where assurance on the BRSR (Business Responsibility and Sustainability Reporting) Core is undertaken. The balance AUM of the scheme can be invested in companies having BRSR disclosures. This requirement will be applicable from October 1, 2024. With regards to disclosure requirements for ESG schemes, Securities and Exchange Board of India said mutual funds will have to clearly disclose the name of the ESG strategy in the name of the concerned ESG fund.