Interest of Govt. and policy makers in sustainable finance have increased manifolds. Leading countries revised their laws or introduced new laws to facilitate sustainable finance ecosystem.
In the year 2016, more than 190 countries agreed on climate change measures in Paris. The Paris Agreement bolstered the corporate role to improve environmental, social and governance parameters for better sustainable futures. Governments’ policy makers across the world are improving the regulations to achieve the Paris agreement goal. It is accepted that regulatory environment will be biggest driver for sustainable growth.
In 2009, the National Voluntary Guidelines (NVGs) were issued by the MCA (Ministry of Corporate Affairs) evidencing India’s early adoption and commitment towards corporate responsibility. For various good reasons, investor awareness about companies that aim for profits along with societal good has been increasing in India.
In India, SEBI has introduced timely regulations related to ESG disclosures. Starting from Business Responsibility Reporting (BRR) in 2012 for top 100 companies the drive extended to mandated CSR in 2014, extension of BRR to 500 top listed companies in 2015, integrated reporting in 2017, adoption of new corporate governance disclosures norms at par with international standards as per Kotak Committee recommendation in 2018, further extension of BRR to top 1000 listed companies in 2019 and replacement of BRR with new Business Responsibility And Sustainability Reporting (BRSR).
As the investors are demanding more investment products sensitive towards people, planet and corporate governance which are creating the opportunity
for institutional investor’s business to grow mandatory for 1000 listed companies from financial year 2022-23.
The European Union regulator recently issued ESG disclosures regulation called Sustainable Finance Disclosure Regulation (SFDR).
China, UK, Japan, and Hong Kong recently updated their ESG disclosure codes as per international standards. IOSCO (International Organization of Securities Commissions) stated in its April 2020 report thus: “broad acknowledgment among regulators, industry participants and other parties that climate-related risks can be material to firms’ business operations and investors’ decisions”.
Recently SEBI also proposed various norms related to disclosures and regulation for ESG mutual funds schemes and ESG rating providers. Indian ESG reporting and disclosure is now rapidly moving towards global international standards and timely regulatory push by SEBI can trigger the chain reaction to further strengthens the ESG ecosystem.
There are international organisations which are working towards corporate sustainability disclosures including Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) etc.
Taskforce on Climate-related Financial Disclosures (TCFD), and Climate Disclosures Standards Board (CDSB) provide the framework for climate risks exclusively. At the end of COP 26 (Conference of Parties) climate summit in Dec, 2021, IFRS also come out with an important announcement to establish the International Sustainability Standard Board (ISSB).
There are growing number of ESG related disclosure standards internationally and hence there is need to consolidate them so that the ESG disclosures could be consistent, comprehensive and comparable.
(India CSR Research)
