Frustrating expectations made on ESG Framework working group

By Consultants Review Team Thursday, 16 November 2023

The advisory panel led by HDFC Mutual Fund's Navneet Munot found the process of developing the recently launched ESG framework - the Core Business Responsibility and Sustainability Report (BRSR) - frustrating due to the demands placed on them, according to Madhabi Puri Buch.

The Chairperson of the Securities and Exchange Board of India (Sebi) stated that at two critical times when the framework appeared to be nearing completion, she sent the group back to the drawing board, asking them to simplify the procedure and backtest the framework.

He remarked, "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 identified about 800 mandatory disclosure factors and was considering whether other—100-odd—leadership parameters could be made mandatory.

"I'm like... are you crazy?" I mean, 800 is terrible enough without making another 100 necessary. I'd like to move in the opposite direction; I'd like you to reduce this to a dozen... that was the challenge I'd issued to the committee. "I asked, 'What do you need that can't be captured in a dozen parameters?'" Buch remembered.

"Sure enough, the committee submitted its report, and thus Core BRSR was born... with only 41 parameters remaining instead of 800." "That was the beginning of a streamlined version of ESG," she explained.

The working group was then faced with the following challenge:

They were confident that it was a decent strategy and were about to submit it when Buch inquired, "Backtesting kidhar hain?" (Where is the backtesting data?)

"As a result, we rely on data." If we can't be sure that the policy we're going to pass will be executed, I'm sorry I can't sign off on it," Buch added.

"Once again, the committee was irritated... "Backtesting took them 2-2.5 months (with 10-12 large corporations and some small corporations participating)," she continued.

Buch stated that the backtesting results revealed that 95 percent of the data required for assurance of the core BRSR was either instantly available or reasonably available within the organization.

"Even the 5 percent that was not and was classified as difficult to get, after some discussion, it was assessed that that number was only 2-3 percent because some were only interpretation issues which we clarified," she went on to say.

"In short, we remain committed to data." "We do not and will not introduce market regulation that is not supported by data," Buch stated.


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