Evaluating Indian regulators’ ESG quotient

Thursday 7 April 2022

Rabindra Jhunjhunwala

Khaitan & Co, Mumbai


Saranya Mishra

Khaitan & Co, Mumbai


The Securities Exchange Board of India (SEBI, the market regulator), the Reserve Bank of India (RBI, the financial regulator), and the Ministry of Corporate Affairs (MCA, the corporate affairs regulator) constitute the corporate regulatory trinity of India. Over the past few years, the regulators have opened channels of communication through consultation papers and attempted to increase corporate sustainability responsibilities by way of regulations. The key green initiatives of the Indian regulators are as follows.

Introducing sustainability reporting requirements

Based on voluntary guidelines issued by MCA in 2009[1] and then in 2011,[2] SEBI released a circular[3] in 2012 that required the top 100 listed entities to include a ‘business responsibility report’ (BRR) in their annual reports. The requirement to file a BRR was progressively extended to the top 500 listed entities in 2015 and to the top 1,000 listed entities in 2019.

In May 2021, based on public consultation[4] and the report of the Committee on Business Responsibility Reporting,[5] SEBI issued a circular[6] replacing the BRR with ‘Business Responsibility and Sustainability Reporting’ (BRSR). BRSR[7] emphasised non-financial aspects of reporting such as social and environmental factors, and placed India on the world map for corporate sustainability reporting.

Revamping corporate social responsibility: the transition from a ‘comply or explain’ to a ‘comply or penalty’ regime

While RBI had issued advisory guidelines[8] for banks in 2007, the Indian company law brought into force in 2013 introduced provisions for corporate social responsibility (CSR) as a voluntary activity for select companies. CSR is essentially permitted philanthropic activities that work towards sustainable development goals. With effect from January 2021, CSR became mandatory for eligible companies, and non-compliance thereof became punishable for both the company as well as ‘officers in default’.

Regulating green securities

Based on a 2015 SEBI public consultation,[9] and voluntary guidelines[10] issued by the Indian Banks Association in 2016, SEBI mooted[11] specific provisions for issuance and listing of green debt securities. In May 2017, it released a circular[12] which:

  • explicitly defined ‘green debt securities’;
  • iterated responsibilities for the issuer; and
  • listed offer letters as well as continuous disclosures.

In 2021, the general regulations for issue and listing of securities were consolidated into one master regulation,[13] and the definition of ‘green debt security’ was compiled therein with amplified end use[14] and discretion to SEBI to add more categories. The 2017 SEBI circular was superseded by an omnibus operational circular issued by SEBI in August 2021[15] and amended in December 2021.[16] Chapter IX of this circular detailed guidelines for the issue and listing of structured/market-linked debt securities, in addition to carrying forward the provisions of the 2017 SEBI Circular.

Encouraging sustainability-related disclosures

From 2014, Indian company law has mandated disclosure in respect of conservation of energy in the report of the board of directors. In 2015, SEBI (through listing regulations[17] applicable to listed entities) required general disclosures of opportunities and threats, risk and concerns and any material information/event having significant impact. In this respect, some guidance was provided by BSE in its Guidance Document on ESG Disclosures.[18]

Regulating ESG mutual fund schemes

In 2021, SEBI released a consultation paper on introducing disclosure norms for ESG mutual fund schemes.[19] This suggested increased disclosure requirements, as well as the adoption of a true-to-label approach requiring at least 80 per cent of asset under management to be invested in ESG-compliant companies.

Attempts to regulate ESG rating providers

SEBI recently released a consultation paper[20] to standardise the ESG rating and related products ecosystem, and regulate ESG rating providers (ERP), which are currently unregulated.

It has, inter alia, proposed that listed entities shall use ESG ratings only from SEBI-accredited ERPs, and sought comments on eligibility criteria for:

  • ERP accreditation;
  • ESG rating scales; and
  • the process, governance and business model of ERPs.

This goes hand in hand with BRSR and is a step towards establishing a new intermediary that would operate in the ESG space.

Based on recent public statements,[21] it is clear that the regulators are not only encouraging the adoption of sustainability, but also standing guard against the possibility of greenwashing. This goes a long way to establish the all-encompassing commitment of Indian regulators to adopt ESG and sustainability principles. Indian regulators are taking synchronised steps for adopting sustainability as a core value of doing business in India, epitomising ‘Who Cares Wins’.[22]​​​​​​


[1] Corporate Governance Voluntary Guidelines 2009 (MCA, December 2009), see www.mca.gov.in/Ministry/latestnews/CG_Voluntary_Guidelines_2009_24dec2009.pdf, accessed 28 March 2022.

[2] National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (MCA, 2011), see www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf, accessed 28 March 2022.

[3] Circular: Business Responsibility Awards (SEBI, 13 August 2012), see www.sebi.gov.in/sebi_data/attachdocs/1344915990072.pdf, accessed 28 March 2022.

[4] Business Responsibility and Sustainability Reporting by listed entities (SEBI), see www.sebi.gov.in/sebi_data/meetingfiles/apr-2021/1619067265752_1.pdf, accessed 28 March 2022.

[5] Report of the Committee on Business Responsibility Reporting (MCA, 11 August 2020), see https://pib.gov.in/PressReleasePage.aspx?PRID=1645169, accessed 28 March 2022.

[6] ‘SEBI issues Circular on “Business Responsibility and Sustainability Reporting by listed entities”’ (SEBI, 10 May 2021), see www.sebi.gov.in/media/press-releases/may-2021/sebi-issues-circular-on-business-responsibility-and-sustainability-reporting-by-listed-entities-_50097.html, accessed 28 March 2022.

[7] Guidance Note for Business Responsibility & Sustainability Reporting Format, (SEBI), see www.sebi.gov.in/sebi_data/commondocs/may-2021/Business%20responsibility%20and%20sustainability%20reporting%20by%20listed%20entitiesAnnexure2_p.PDF, accessed 28 March 2022.

[8] Corporate Social Responsibility, Sustainable Development and Non-Financial Reporting – Role of Banks (RBI, 20 December 2007), see https://rbidocs.rbi.org.in/rdocs/notification/PDFs/82186.pdf, accessed 28 March 2022.

[9] Concept paper for issuance of Green Bonds (SEBI, 2015), see www.sebi.gov.in/sebi_data/attachdocs/1449143298693.pdf, accessed 28 March 2022.

[10] National Voluntary Guidelines for Responsible Financing (Indian Banks’ Association, 2016), see www.iba.org.in/reports/national-voluntary-guidelines-for-responsible-financing_290.html, accessed 28 March 2022.

[11] Disclosure Requirements for Issuance and Listing Green Bonds, (SEBI), see www.sebi.gov.in/sebi_data/meetingfiles/1453349548574-a.pdf, accessed 28 March 2022.

[12] Disclosure Requirements for Issuance and Listing of Green Debt Securities (SEBI, 30 May 2017), see www.sebi.gov.in/legal/circulars/may-2017/disclosure-requirements-for-issuance-and-listing-of-green-debt-securities_34988.html, accessed 28 March 2022.

[13] Issue and Listing of Non-Convertible Securities Regulations, 2021 (SEBI, 9 August 2021), see www.sebi.gov.in/legal/regulations/aug-2021/securities-and-exchange-board-of-india-issue-and-listing-of-non-convertible-securities-regulations-2021_51764.html, accessed 28 March 2022.

​​​​​​​[14] As background, until 2021, the SEBI 2017 Circular was the applicable law, and it defined ‘green debt securities’ as securities issued for raising funds for end use towards renewable and sustainable energy, clean transportation, sustainable water and waste management, climate crisis adaptation and energy efficiency. In 2021, the consolidated ‘one master regulation’ increased the scope of the regulatorily permitted end use of ‘green debt security’ to include sustainable land use and biodiversity conservation, adding them to the existing categories of end use as described under the SEBI 2017 Circular, and further gave discretion to SEBI to add further categories for the end use of ‘green debt security’. 

[15] Operational Circular for issue and listing of Non-Convertible Securities (NCS), Securitised Debt Instruments (SDI), Security Receipts (SR), Municipal Debt Securities and Commercial Paper (CP) (SEBI, 10 August 2022), see www.sebi.gov.in/legal/circulars/aug-2021/operational-circular-for-issue-and-listing-of-non-convertible-securities-ncs-securitised-debt-instruments-sdi-security-receipts-sr-municipal-debt-securities-and-commercial-paper-cp-_51761.html, accessed 28 March 2022.

[16] Revised Operational Circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper (SEBI, 17 December 2021), see www.sebi.gov.in/legal/circulars/dec-2021/revised-operational-circular-for-issue-and-listing-of-non-convertible-securities-securitised-debt-instruments-security-receipts-municipal-debt-securities-and-commercial-paper_54704.html, accessed 28 March 2022.

[17] Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [Last amended on January 24, 2022] (SEBI, 24 January 2022), see www.sebi.gov.in/legal/regulations/jan-2022/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-regulations-2015-last-amended-on-january-24-2022-_55993.html, accessed 28 March 2022

[18] Guidance Document on ESG Disclosures (BSE), see www.bseindia.com/downloads1/BSEs_Guidance_doc_on_ESG.pdf, accessed 28 March 2022.

[19] Consultation Paper on introducing disclosure norms for ESG Mutual Fund Schemes (SEBI, 26 October 2021), see www.sebi.gov.in/reports-and-statistics/reports/oct-2021/consultation-paper-on-introducing-disclosure-norms-for-esg-mutual-fund-schemes_53500.html, accessed 28 March 2022.

[20] Consultation Paper on Environmental, Social and Governance (ESG) Rating Providers for Securities Markets (SEBI, 24 January 2022), see www.sebi.gov.in/reports-and-statistics/reports/jan-2022/consultation-paper-on-environmental-social-and-governance-esg-rating-providers-for-securities-markets_55516.html, accessed 28 March 2022.

[21] ‘Regulators have to be on the guard against greenwashing: Tyagi’ (Mint, 10 November 2021), see www.livemint.com/market/stock-market-news/regulators-need-to-guard-against-greenwashing-by-funds-issuers-ajay-tyagi-11636552354544.html, accessed 28 March 2022.

[22] Who Cares Wins — Connecting Financial Markets to a Changing World (International Finance Corporation, June 2004), see www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/sustainability-at-ifc/publications/publications_report_whocareswins__wci__1319579355342, accessed 28 March 2022.