Strengthening the BRSR core: A masterstroke

ESG is one of the primary areas that the government is looking to address for the corporates in the coming year. It has also been in the check list for investors, who are willing to put money only into companies that are ESG compliant. 

SEBI made an important announcement on March 29th, 2023, that addressed the complex question of how to accurately disclose ESG information and combat greenwashing, all while enhancing investment in the ESG ecosystem. SEBI reduced the number of parameters for ESG disclosures from 800 to 50, which has not diluted the impact of ESG disclosures but instead has made them more firmly entrenched in the world of finance.

The introduction of a BRSR core with limited parameters means that reporting accuracy and dynamic reliability will be boosted, allowing for an accelerated adoption of ESG parameters. The disclosures of one corporate entity can now easily be compared with any other corporate entity, leading to a high level of assurance and making the “ease of doing business” a lot easier.

One of the biggest beneficiaries of this BRSR core are the supply chains of organizations, which are highly susceptible to enabling greenwashing. With multiple parameters in existence, companies wishing for a good ESG source could simply outsource their low-performing ESG parameters to their suppliers or dealers. By reducing the parameters to a manageable 50, the new BRSR core will enhance mass-scale coverage, making it easier to comply.

With better reporting and fewer parameters to govern, investment into ESG will become even more structured, reliable, and secure. ESG is now set to become its own mutual fund category. ESG launch schemes were previously the only safe and reliable options to enter the mutual fund space. However, with the widespread coverage of ESG parameters and the risk of greenwashing being reduced, ESG as a category will have more than a dozen approaches for investment.

SEBI chairperson Madhabi Puri Buch explains that “in terms of ESG investing, the risk of greenwashing must be minimized, therefore we are introducing two things. Mutual funds have a restriction on how many schemes they can launch. We have now created ESG as a category, you can have more ESG schemes going forward. But, at the same time, there is a greater emphasis on disclosures so that investors know what they are putting their money into.” This essentially means that the colors of the ESG bonds just got more vibrant, with Green bonds, Blue Bonds (Carbon Credits), and Yellow Bonds (Solar energy and transition finance) attracting tremendous investment, especially in the emerging ESG market of India.

The innovative BRSR core is galvanizing the industry by improving the transparency of ESG disclosures, which in turn is increasing investment in ESG. Disclosures are now an important business continuity tool, enabling the rapid proliferation of ESG amongst mid and small-level businesses and entwining jurisprudence with economics and sustainability in a mutually beneficial way. Who doesn’t want to save the environment while generating profit?

(Anu Chaudhary, Partner and Global Head of ESG Consulting Practice, Uniqus Consultech. Views expressed are author’s own.)