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Sebi allows mutual funds to expand ESG offerings

Expand ESG offerings

At a time when ESG (environmental, social, and corporate governance) is becoming increasingly significant in the world of investing, the Securities and Exchange Board of India (Sebi) has allowed mutual funds to diversify their offers in this area.  

The watchdog said on Thursday that a separate sub-category for ESG investments will be permitted, and fund houses will be able to launch various strategy-based funds inside the category.  

Meanwhile, the regulator has underlined that at least 80% of the total assets under management (AUM) of ESG schemes must be invested in equities and equity-related instruments of that strategy. 

“The remaining portion of the investment shall not be contrary to the scheme’s strategy.” Mutual Funds must “strive to deploy a higher proportion of assets toward the scheme’s strategy under the ESG theme and make appropriate disclosures,” according to the circular.  


The regulator has also asked the fund firms to ensure that the schemes, among other things, are clearly distinct in terms of asset allocation and investment strategy.  

In terms of investment requirements, ESG schemes are now only permitted to participate in companies who have thorough Business Responsibility and Sustainability Reporting (BRSR) disclosures.   

As part of the latest development, ESG funds are now permitted to invest at least 65 percent of their AUM in companies who report on full BRSR and provide assurance on BRSR Core disclosures.