Fin mkts key to sustainable GDP growth

Complicated Transition

• Coordination among investors, companies, regulators and civil society needed
• India needs $10-trn investment to meet zero carbon footprint by 2070
• India is the first geography to start social stock exchange
• Top 150 listed entities will have to make a reasonable assurance on BRSR in FY24

Mumbai: India’s rapid economic growth needs to be accompanied with the transition to a sustainable economy, Sebi’s whole-time member Ashwani Bhatia said on Thursday and stressed that financial markets will play a critical role in promoting sustainable finance. Speaking at an international finance conference on the ‘Role of Financial Markets in Sustainable Growth through ESG Investments,’ Bhatia said, countries including India, have made a number of important commitments in the last few years to address climate change and moving to sustainable and inclusive economies.

The one-day conference was hosted by the Anjuman-I-Islam’s Allana Institute of Management Studies in association with the BSE here. Anjuman-i-Islam has completed 150 years of its establishment this year. “The Indian economy is at a stage of rapid growth. However, this growth needs to be accompanied with the transition to a sustainable economy. As regulators, we are putting in place holistic regulatory framework covering aspects of financing or disclosures and transparency,” Bhatia said.

He said that this transition will be complicated and all the stakeholders -- investors, companies, regulators and civil society -- will have to coordinate and collaborate for its successful execution. Noting that during the last few years there is a search in global efforts to address climate change and moving to sustainable and inclusive economies, he said countries including India have made a number of important commitments in this space.

“But commitments to act must be underpinned by funding. As per an estimate, a total investment of $10 trillion would be needed to meet India’s commitments by 2070 to have zero carbon footprint,” he said. India is the first geography to start social stock exchange and to have a framework for assurance and ESG disclosures for value chain, Business Responsibility and Sustainability Reporting (BRSR) to ensure all the work that is done is sustainable in all manners, Bhatia said.

Sebi has also prescribed the light path for the implementation of the parameters, he said, adding that top 150 listed entities will have to make a reasonable assurance on BRSR in FY24. “It will start with 150 and by 2026 we will touch 1,000 listed entities. The disclosures also require people in the value chain and your vendors to make limited assurance from the next fiscal onwards,” he said.

ESG rating, Bhatia, said is another area, which is drawing Sebi’s regulatory attention. Emphasizing that the capital market plays a key role in the country’s economic development, he said as the country pivots to sustainable and inclusive growth, our market will play a critical role in promoting, sustainable finance. He said that Sebi has done considerable work on green bonds, adding that in 2017, it laid the regulatory framework for the bonds as an avenue for channelizing funds in green activities. “Unfortunately, we only have 15 issuances with approximately Rs4,600 crore. If you compare this, on an average, every year the debt market raises Rs 7-lakh crore. But on the green side we are way behind. In the backdrop of increasing interest in sustainable finance, Sebi has recently undertaken a review of the regulatory framework for green-tech securities,” he said.

Bhatia also said that the scope of definition of green has been enhanced to include other modes of sustainable finance in relation to pollution, prevention and control, eco-efficient products.