In March 2018, NSE launched two indices – Nifty100 ESG Index and Nifty100 Enhanced ESG Index – to capture the environmental and social governance scores of Nifty 100 companies. The companies on these two indices were assessed annually by the ratings provided by Sustainalytics.
Eight fund houses run ESG schemes with a total asset under management of around ₹11,000 crore. Some of the schemes are benchmarked against NSE ESG indices.
NSE did not respond to a query seeking comment.
A spokesperson for Morningstar Investment Research India told ET that they will no longer be providing “second-party opinions’ in the Indian market.
“Following a careful assessment of the recently adopted new eligibility requirements by the Sebi for ESG Ratings Providers, Morningstar Sustainalytics will no longer distribute ESG data and ratings to clients and users in India by December 1, 2023.”On July 3, Sebi issued a master circular on ESG rating providers outlining the procedures to be followed in an attempt to bring uniformity to the process. According to the new norms set by Sebi, an entity seeking to become an ESG rating provider must adhere to several requirements. This includes having a minimum of four employees with specialisation in areas such as governance, sustainability, social impact or social responsibility, data analytics, finance, information technology, and law.Additionally, the ESG rating provider is required to maintain a website and disclose ratings, along with other details, including all confidential aspects of the rating methodologies. Furthermore, an ESG rating provider is prohibited from directly or indirectly holding 10% or more shareholding or voting rights in any other ESG rating provider.
“Our decision not to pursue registration in light of the elevated regulatory requirements was a difficult one that balances these requirements with the market opportunity,” Morningstar said.
