TaxTMI 
TaxTMI 
New category of Mutual Fund schemes for Environmental, Social and Governance (“ESG”) Investing and related disclosures by Mutual Funds
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....t regulatory requirements, Mutual Funds are permitted to launch only one scheme with ESG investing under the thematic category for Equity schemes. In view of the industry representations for allowing multiple schemes with different ESG strategies and considering the increasing need for green financing, it has been decided to permit launch of multiple ESG schemes with different strategies by Mutual Funds. 2. The concept of ESG investments is emerging and therefore consistent, comparable, and decision-useful scheme disclosures is desirable to enable investors to make informed investment decision and to prevent greenwashing. In this regard, SEBI, vide letters dated February 08, 2022 and June 21, 2022 to AMFI, had prescribed disclosure norms....
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....tegies (details of strategies are at Annexure A) - a. Exclusion b. Integration c. Best-in-class & Positive Screening d. Impact investing e. Sustainable objectives f. Transition or transition related investments 4.1.2. Minimum 80% of the total assets under management (AUM) of ESG schemes shall be invested in equity & equity related instruments of that particular strategy of the scheme (as per the above specified sub-strategies). The remaining portion of the investment shall not be in contrast to the strategy of the scheme. Mutual Funds shall endeavour to deploy a higher proportion of the assets towards the scheme's strategy under the ESG theme and make suitable disclosures. 4.1.3. A....
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....Exclusionary Strategy Fund, ABC ESG Best-in-class Strategy Fund etc. 4.3.2. ESG scores of securities 4.3.2.1. Mutual Funds shall disclose the following in their monthly portfolio statements of ESG schemes: a) Security wise BRSR Core scores {as and when the same is made available by SEBI registered ESG Rating Provider (ERPs)}, along with the BRSR scores. b) Name of the ERPs providing ESG scores for the ESG schemes, along with the ESG scores. In case there is a change in ERP, the reason for such change shall also be disclosed in the next monthly portfolio statements of ESG schemes. 4.3.2.2. These requirements shall be applicable with immediate effect. 4.3.3. Voting disclosures by ESG schemes 4.3.3.1. Clauses 6....
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....port of the ESG schemes. The Fund Managers Commentary shall include the following: a) Examples on how ESG strategy was applied on the fund, how engagements were carried out, any escalation strategy that the Fund Manager may have applied on the portfolio companies, annual tracking of ESG rating movements in the investee companies etc. b) Case studies where Fund Managers have engaged with portfolio companies with a clear objective of engagement and engagements carried out for exercise of votes. c) The details on number of engagements carried out in a year, the modes of communication employed, and if any outcomes were achieved in the reporting year shall be included in the fund managers' commentary. If ESG schemes ha....
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.... annual report. 4.3.5.2. The Board of AMCs shall ensure that the assurance provider for an ESG scheme has the necessary expertise, for undertaking reasonable assurance. 4.3.5.3. The AMCs shall also ensure that there is no conflict of interest with the assurance provider appointed for providing assurance on their ESG schemes. For instance, it shall be ensured that the assurance provider or any of its associates do not sell its products or provide any non-audit / non-assurance related service including consulting services, to the AMC or its group entities. B. Certification by the Board of AMCs 4.3.5.4. The board of directors of AMCs, based on comprehensive internal ESG audit, shall certify the compliance of ESG schemes with the ....
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....ce, where applicable, to any law/ regulation/ third-party standard/ guideline/ framework used in the establishment or evaluation of the criterion. b. Integration Explicitly consider ESG related factors that are material to the risk and return of the investment, alongside traditional financial factors, when making investment decisions. c. Best-in-class & Positive Screening Aim to invest in companies and issuers that perform better than peers on one or more performance metrics related to ESG matters. The details/specifics of the metrics should be disclosed. d. Impact investing Seeks to generate a positive, measurable social or environmental impact alongside a financial return and how the Fund Manager intend....