Pushed ESG Framework Group To Simplify Compliance, Conduct Back Testing Of Data: Sebi Chairman

Madhabi Puri Buch, the Chairperson of the Securities and Exchange Board of India (Sebi), mentioned that the advisory panel, led by Navneet Munot of HDFC Mutual Fund, found the process of creating the recently launched ESG framework. Known as the Core Business Responsibility and Sustainability Report (BRSR), frustrating due to the challenging requirements. Buch shared that at two crucial stages, when it seemed like the framework was almost ready, she instructed the group to go back to the drawing board. The goal was to simplify the process and to test the framework thoroughly. This was discussed during her speech at FICCI’s Capital Market Conference.

Buch stated, “I remember the committee, headed by Navneet, was very frustrated with me because in the first meeting I attended, I made them do a U-turn.”

The working group had about 800 mandatory parameters that must be disclosed, and they were also considering making about 100 more leadership-related things mandatory.

“Sure enough, the committee submitted its report and that was the birth of Core BRSR, where, in place of 800 parameters, there are only 41 remaining. That was the birth of a simplified version of ESG,” Buch said.

The working group faced another challenge. Even though they were confident in their plan and prepared to submit it, Buch raised a crucial question, asking, “Backtesting kidhar hain?” (Where is the data from backtesting?)

“Again the committee was very frustrated it took them 2-2.5 months to do the backtesting (In which 10 to 12 major corporations and several smaller ones took part),”she added.

Buch mentioned that when they checked the data needed to make sure Core BRSR was reliable, 95% of it was either already there or could be easily obtained within the company.