Mutual Funds: SEBI Introduces New Category For ESG Investments
Mutual funds can now launch multiple ESG schemes with different investment strategies, says SEBI.
SEBI introduced a sub-category for environmental, social, and governance investments under the thematic category of equity investments on Thursday.
A scheme can be introduced under this category with any of the six strategies provided by the market regulator. This includes exclusion, integration, best-in-class and positive screening, impact investing, sustainable objectives, and transition or transition-related investments, according to a circular by the Securities and Exchange Board of India.
The proposal for it was initially made in February. Currently, mutual funds are permitted to launch only one scheme with ESG investing under the thematic category for equity schemes. However, the regulator has now allowed the launch of multiple schemes with different strategies, considering industry representations demanding multiple schemes with multiple strategies and also to reduce the risk of greenwashing.
The mutual funds should ensure that at least 80% of the assets under management are invested in equity and equity-related instruments related to that particular strategy of the scheme. It should also ensure that the remaining 20% is not made in contrast to the scheme.
It should ensure that 65% of the AUM is invested in companies with comprehensive business-responsibility and sustainability reporting disclosures and that they are also providing assurance on BRSR Core disclosures. The rest can be invested in companies that just comply with the BRSR disclosures.
The regulator also imposed several disclosure obligations on the mutual funds. The name of the scheme should reflect the strategy undertaken. They should disclose the ESG scores of securities on a monthly basis, along with details of the ESG rating provider assigning such scores and voting details with respect to investments on a quarterly basis.
