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IDENTICAL MINOR CHANGES PARAPHRASED

2024

48 Hour Challenge
EY CAFTA: Sustainable finance innovators
Divyanshu Singh & Krrish kohli
Index
Introduction: Overview of ESG Reporting
Scope of the Document
Understanding the Regulatory FrameworkTreasury operations
Regulatory Bodies

Recent Amendments
ESG Reporting RequirementsCorporates
Financial Institutions

ESG Reporting and Treasury Operations

Conclusion
References
Introduction
Overview of ESG Reporting in India
Environment, Social, and Governance (or ESG) reporting is a fairly new development in the Indian markets.
This framework allows for measuring the social and environmental costs of business operations while also
taking into account the development of society and its members. ESG stands for equal opportunities for
businesses operating now and, in the future, for employees of all races, castes, genders, and other social
divisions, and for the environment to sustain and progress alongside the active consumption of resources.
Currently, India does not have a single concrete ESG regulation. The different aspects of ESG values are
highlighted and protected through amendments and extensions of the existing legal and regulatory
framework. Several institutions work synchronously to provide directions to the Indian market to move
towards sustainable practices.
Sustainable reporting is also important from an international standpoint. International regulations
employing carbon taxes and other green regulations restrict the proliferation of non-green businesses in
the international market, which is a big hindrance for India. Thus, to comply with the international
regulations set forth by the UN, EU, and others, it is important to adopt sustainable practices, and one way
to promote these is by regulating different aspects of them and nudging the market towards socially
desirable goals.
Climate change has also been a cause of concern globally, and thus, to meet its international
commitments in the G20, UNGA, Paris Agreement, and other international conventions, it is a necessary
step for India to transcend towards sustainable reporting. This also allows us to take the necessary steps
towards avoiding the adverse effects of climate change on domestic markets.
Consumers, too, have become much more socially and environmentally aware than they were a few
decades ago, and businesses have to respond to consumers’ concerns. This makes sustainability the road
to future progress. ESG reporting plays a crucial role in this journey, and thus the regulations governing it
become the building blocks of the future economy.
Scope of the Document
This document looks at the different regulations governing the ESG values and highlights their key
features. Since ESG regulations are being adopted, the different amendments in the legislation have also
been showcased to give an insight in the ever-evolving space and show the direction taken by the
government in the sustainable reporting space. The document also focuses on the reporting frameworks
as required by the regulatory bodies for reporting their sustainable practices. These requirements differ
based on the type of enterprise and scope of operation. The last part links these ESG regulations with
treasury operations to gauge the impact of the revised regulatory framework and how the treasury will
have to modify its working.
Understanding the Regulatory Framework
Before we proceed with understanding the ESG regulatory framework, it is important to first highlight the
main focus area of this document, i.e. the different functions of Treasury operations. While there is no
direct regulation governing the treasury regulations of any enterprise individually, a set of laws and
compliance measures, enforce regulations to adopt sustainable practices and reporting frameworks that
also involve changes in the treasury operations indirectly. It is important to first highlight the different
treasury operations.
The Treasury Functions:
Cash Flow Management:
This includes practices like cash flow forecasting, bank account management, cash pooling, payments, and
collection. ESG regulations make the operation of cash flow management important to forecast the cash
requirement in light of climate-related and market-related risks. Cash forecasting includes incorporating
all potential risks an enterprise faces, and maintaining a fair cash position becomes an important aspect
of the same.
Liquidity and Investment Management:
This involves planning for short-term payments and other financial obligations. Violation of ESG
regulations may impose unnecessary penalties on an organisation. This also includes investing the surplus
resources to earn returns. Investment in green initiatives has several social and economic benefits for any
organisation.
Risk Management:
This involves foreseeing the potential risks that an enterprise may face, accordingly maintaining provisions
for such risks, and taking steps to prevent such risks as much as possible. It covers market risks, credit
risks, financial risks, and operational risks. With the growing climate-related problems, there is also
additional climate risk, social risk, and sustainability risk that an enterprise may face.
Funding and Debt Management:
Securing funding from investors and banks falls under the purview of the Treasury. Given the regulations
being imposed by different international and domestic bodies, investing in green initiatives has become
more incentivizing for investors. Driven by the need to promote green projects and initiatives, investors
impose certain conditions on corporations that may hinder their operations. Thus, it becomes significantly
important for corporations to secure a green tag to secure funding conveniently. This is also because
consumers today emphasise using green products, which, if not worked upon by any enterprise, may
affect its market share negatively and thus the investment.
Reporting and Analysis:
As part of the different compliance measures, corporations are required to prepare financial statements
and use them to track performance, identify trends, and support decision-making. This becomes a key
aspect when a business considers its social and environmental performance to be of importance. The
effectiveness of the treasury operations against established goals and benchmarks also helps the
stakeholders determine the growth potential and capabilities of the management of any enterprise.
Regulatory Compliance:
There are several regulations that a business needs to adhere to in order to carry out its operations. These
may be requirements of the law to publish its financial results or issue a statement about any major
changes in the board of any company. These regulatory compliances allow businesses to continue fair
practices and ensure market and industry regulation. The ESG framework becomes an important aspect of
this regulatory compliance, and thus, this function of the Treasury operations has to necessarily comply
with any changes made and is the first operation to undergo changes given the new ESG requirements.
This regulatory compliance also directs the decision-making of any enterprise.

Regulatory Bodies Overview

While there is no single governing law for the measurement, assessment, or regulation of ESG reporting, a
set of laws mandated by the key regulatory bodies provide a direction for ESG reporting in India. These
regulatory bodies govern and direct different aspects of ESG reporting that affect Treasury operations
quite distinctively. These regulatory bodies include:
Reserve Bank of India (RBI)
Securities and Exchange Board of India (SEBI)
Ministry of Corporate Affairs (MCA)
Indian Renewable Energy Development Agency (IREDA)
International Financial Services Centre Authority (IFSCA)
Other than these regulatory bodies, some directions from the Insurance Regulatory and Development
Authority of India (IRDAI), Climate Change Finance Unit (CCFU), Ministry of Finance, National Stock
Exchange (NSE), Bombay Stock Exchange (BSE), and Pension Fund Regulatory and Development Authority
(PFRDA) also apply to selected companies that fall under their scope.
With regard to the overall treasury functions, the 5 regulatory bodies mentioned above issue majority of
the directives either directly or through the bodies that come under them.
Reserve Bank of India
The Indian government's monetary and other banking policies are regulated by the Central Bank of India.
RBI's notification on "Corporate Social Responsibility, Sustainable Development and Nonfinancial
Reporting – Role of Banks" from 2007 was the first to make statements and take action on green finance.
The notification emphasised the significance of global warming and climate change in the context of
sustainable development.

Additionally, RBI has implemented numerous policies and regulations to advance green finance. Some
notable examples are as follows:
RBI Report on Trends and Progress of Banking, which exhorted financial institutions to adhere to
sustainable practices and argued that India's banks should be made aware of international initiatives
(such as the Equator Principles).
A study conducted by the Reserve Bank of India (RBI) demonstrated that climate change has a substantial
effect on the inflation of food prices (2020).
The Reserve Bank of India (RBI) has joined the Network of Central Banks and Supervisors for Greening the
Financial System (NGFS) in 2021.
The RBI, as the central bank, is instrumental in the preservation of financial stability and the integrity of
the banking system. This encompasses the mitigation of potential financial hazards associated with
climate change and other ESG factors.
Some key guidelines of the RBI include Schemes for Promotion of Financial Inclusion (Link) and Promotion
of SDGs.
The RBI promotes several financial inclusion schemes through awareness campaigns and changes in the
regulatory framework. The incorporation of cooperative banks and other development banks eased the
line of credit for rural and urban MSMEs. Alongside this, RBI promotes the United Nations Sustainable
Development Goals through regulatory modifications in the disclosures to be made by the registered
entities. RBI also mandates corporations to invest in social development through CSR schemes, which
require corporations to share a portion of their average profits of 3 years towards social welfare schemes
and NGOs. (link).
Other than these major regulations, RBI regularly invites comments from different stakeholders and is
currently in the process of reviewing its Green Bond guidelines, inviting comments on its disclosure of
financial risks framework (link) and constantly reviews its priority sector lending guidelines.
Securities and Exchange Board of India (SEBI)
SEBI is responsible for ensuring the welfare of investors and constantly works to improve the
transparency between corporations and investors, as well as regulators. It is the primary regulator of the
operations of all listed entities and issues guidelines to remove the information asymmetry in the market.
SEBI also directs institutions that fall under it, like the Association of Mutual Funds of India (AMFI), to direct
the mutual funds to improve transparency under their ESG investment schemes and prevent
greenwashing. Some of the regulations of SEBI include:
Business Responsibility and Sustainability Report (BRSR 2021)
This mandates corporations from FY 2022–23 to publish information about their BRSR initiatives along
with their annual reports to promote greater transparency for social initiatives. It is currently applicable to
the top 1000 listed companies, with a view to including other companies under its purview in the coming
years. In 2023, SEBI introduced another domain under BRSR called BRSR Core, which is currently
applicable to the top 150 companies and will be applicable to the top 1000 companies by FY 27. The BRSR
Core provides a revamped framework for reporting different aspects of business operations, including the
business value chain, to measure the social and environmental impact of a corporation.

This mandatory reporting allows the regulator to monitor business activity closely and accordingly modify
its frameworks to deliver impact more efficiently. This reporting also improves investor sentiments,
especially those of foreign investors, with regard to the social visibility and scalability of a company, thus
driving the growth of investments in the domestic markets. It also improves credit accessibility for
corporations trying to make a significant difference in society.
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR)
This regulation mandates corporations to disclose their exposure to ESG risks and opportunities. This
necessitates corporations to have a forward-looking perspective and project their financial and
operational positions in light of global and domestic social and environmental changes. This increases the
reliance on Treasury operations for sustainable financial reporting and regulatory compliance. The
Treasury mandates that it undertake scenario analysis, account for different threats and risks to their
business operations, allow investors and business owners to make more informed choices, and make
necessary revisions to their business framework and operations.
Adherence to the NGRBC Principles
It is mandatory for companies to report their adherence to the National Guidelines for Responsible
Business Conduct. It includes, but is not limited to, the disclosure of the structure of an organisation, its
employees, etc.
Promoting Sustainable Finance
SEBI also undertakes the responsibility to promote sustainable financial practices with all its stakeholders
via notifications and circulars to share the best practices that can be adopted by enterprises. These are
different from regulations, as they are only suggestive in nature and are also meant to promote new
features and frameworks developed by SEBI. At times, SEBI also works with other financial institutions to
incorporate regulatory changes in their respective industries and promote sustainable practices.
The Association of Mutual Funds of India (AMFI), the industry authority for mutual funds, has been
assigned disclosure standards for ESG-labelled mutual fund schemes by SEBI in letters dated February 8,
2022, and June 21, 2022. The following are mandatory disclosures that must be included in the scheme
information documents: disclosure of the objective, asset allocation, and stewardship activities on
material ESG issues; maintenance of information related to ESG policy and various aspects of ESG
investing on the website; standardisation of the ESG scoring process; and publication of security-wise
scores.
Rules for ESG funds were established by the Securities and Exchange Board of India with effect from
October 1, 2024. An ESG fund's assets under management must be invested in accordance with its ESG
strategy to the extent of at least 80% under these regulations. The fund must invest a minimum of 65% of
its AUM in companies that disclose comprehensive business responsibility and sustainability reporting.
The ESG fund has until September 30, 2025, to guarantee compliance if it is not compliant by October 1,
2024. (SEBI circular No. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated July 12, 2023)
ESG Advisory Committee, May 2022
In May 2022, SEBI constituted the ESG Advisory Committee to look after all the regulations and regulatory
framework of ESG reporting. The committee includes representatives of different stakeholders like mutual
funds, insurance bodies, industry bodies, etc.
It also dictates several mandates for existing corporations to prevent greenwashing and establishes
quantitative parameters for its assessment. For example, with regard to mutual funds, SEBI states that an
ESG scheme shall invest at least 65% of its AUM in companies that are reporting on comprehensive BRSR
and are also providing assurance on BRSR Core Disclosures. The remaining investments in the scheme
shall be in companies reporting on BRSR.
Ministry of Corporate Affairs:
MCA undertakes the responsibility of defining the National Guidelines on Responsible Business Conduct
(NGRBC). MCA has the authority to modify or amend any or all of the of the principles of the NGRBC. All
companies registered under the Companies Act, 2013 or any of its previous versions have to necessarily
abide by the NGRBC. These guidelines include several ESG values that are important from a treasury
perspective as well. They guide the investment decisions of corporations, ethical sourcing, and supply
chain management. MCA also promotes ESG values through the provisions of the Companies Act, 2013.
The Companies Act, 2013 guides the governance of corporations and thus impacts the governance section
of ESG reporting. It mandates several guidelines, which all registered companies have to abide by. This
also includes the composition of the Board of Directors, the presence of independent directors, and the
free and fair selection and promotion of employees. It also prevents organisations from dealing in bad
faith. They also promote stakeholder engagement and transparency between the organisation and its
stakeholders. It is one of the most prominent regulators of a company's compliance with ESG and other
non-financial reporting.
MCA also lays down the compliance principles for green sovereign bonds. MCA promotes the adoption of
voluntary frameworks for sustainable reporting like the Global Reporting Initiative Standards, Sustainable
Accounting Standards Board (SASB), Task Force on Climate Related Financial Disclosures (TCFD), and ISO
26000.
Indian Renewable Energy Development Agency (IREDA) – (Link)
IREDA issues CSR and Sustainability Guidelines for corporations to improve the self-sustaining investment
schemes of the corporations in projects related to energy efficiency and clean technologies. It also
undertakes the responsibility to look after the impact assessment of the CSR activities of corporations and
also sets the accountability and responsibility for the CSR activities of a corporation. Its primary goal is to
ensure that sustainable practices proliferate in the industry.
International Financial Services Centres Authority (IFSCA) – (Link)
IREDA issues CSR and sustainability guidelines for corporations to improve their self-sustaining
investment schemes in projects related to energy efficiency and clean technologies. It also undertakes the
responsibility to look after the impact assessment of the CSR activities of corporations and sets the
accountability and responsibility for the CSR activities of a corporation. Its primary goal is to ensure that
sustainable practices proliferate in the industry. possible.
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)
The stock exchanges aid SEBI in maintaining a quick and effective implementation of SEBI guidelines. They
enforce the requirements enlisted by SEBI and maintain a record of the documents listed by the
corporations. They have also launched ESG indices that track companies with good ESG performance,
creating market demand for ESG compliance. They also provide guidance to corporations for their correct
reporting and engage with investors at a direct level. Additionally, they issue circulars and guidelines for
companies with respect to their internal audit for any new modifications or changes in compliance.
In 2018, the Bombay Stock Exchange published a guidance document for all corporations listed on it to
provide a comprehensive set of voluntary ESG reporting recommendations along with 33 key performance
indicators.
Some Recent Amendments
RBI’s Disclosure of Financial Risks, 2024:
RBI is currently in the process of finalising the draft for the disclosure of financial risks by all registered
entities. This draft covers all the aspects of disclosure climate related risks faced by the organisations and
ensures that investors and other institutions make informed choices.
BRSR Core, 2023:
This is an extension of the previous BRSR framework to bring ESG reporting in India at par with the
international standards such as GRI, TPCD, and others. It allows for detailed reporting of business
operations and throws special light on business supply chain. This would allow for the direct involvement
of the treasury to allow for better compliance management and meeting the regulations.
Master Circular for ESG Rating Providers, May 2024 (Link):
This circular highlights the registration process for ERPs and ensures that rating scale and ESG scores are
uniform across ERPs. It also highlights all the guidelines related to providing and withdrawing ratings,
internal audit for ERPs, and dealing with conflict of interests among others.
Amendments to Mutual Funds Regulations, July 2023 (Link):
SEBI has created a new category for investors who want to include ESG factors in their mutual fund
holdings. They have also allowed six investment strategies, which cover a wide range of basic investment
ideas: exclusion, integration, best-in-class and positive screening, impact investing, sustainable objectives,
and transition or transition-related investments.
Operational Circular on Green Debt Securities, May 2023: (Link 1)
A The SEBI released a guide/aid to prevent greenwashing in securities related to green debt, emphasizing
recommendations and considerations for evaluating, selecting, and monitoring these investments.
Earlier, in February 2023, SEBI introduced more stringent disclosure requirements for green debt
securities and instructed companies to compulsorily conduct third-party reviews and audits to ensure
transparency and credibility.
Green Bond Reporting
Companies, investing/ trading in green bonds must disclose the utilisation of their proceeds, amount of
sourcing and project details of their investments as per the framework given under BRSR, details of
environmental implications of the project along with information related to any external review or audit of
issuer’s green bond framework. SEBI also controls the licensing of the ESG Rating Providers (ERP) which
are organisations allowed to provide sustainability rating to organisations as part of their sustainability
reporting.
Guidelines for Issuance of Green Bonds by Regulated Entities (Link1, Link 2)

RBI has issued guidelines to promote the proliferation of the green bonds and sustainable investment
schemes through the Regulated Entities (RE). It also highlights the Government of India's obligations as a
Green Bond issuer. The Framework is applicable to all sovereign green bonds issued by the Government
of India. Principal and interest payments on the issuances under this Framework are not contingent upon
the performance of the eligible initiatives. Investors in bonds issued under this Framework are not
exposed to any project-related risks.
The Department of Economic Affairs, Ministry of Finance, retains the authority to modify this Framework
in accordance with the Government of India's international commitments and environmental priorities, or
in accordance with international best practices. An independent provider will evaluate modifications to the
Framework. The framework is intended to adhere to the four components and essential
recommendations of the International Capital Market Association (ICMA) Green Bond Principles (2021).
These principles suggest that the issuer establish a transparent process and disclose information to
facilitate the comprehension of the green bond's characteristics by investors, banks, and other
stakeholders.
The four fundamental components, as delineated by the ICMA green bond principles, are as follows:
Utilisation of proceeds
Evaluation and selection of projects
Management of proceeds
Accountability.
In order to enhance transparency, the ICMA also suggests that the issuer establish a Green Bond
Framework that wis accessible to the investor, and that the issuer conduct an external review. This
framework also states the list of uses for the proceeds as well as a list of exclusions, thus streamlining the
investment portfolio and avoiding potential greenwashing.

Other Laws:
ESG framework in India is also influenced by previously established laws. Some key legislations that
contribute to the ESG framework include:
Environment: The Factories Act of 1948, the Environment Protection Act of 1986, the Air (Prevention and
Control of Pollution) Act of 1981, the Water (Prevention and Control of Pollution) Act of 1974, and the
Hazardous Waste (Management, Handling and Transboundary Movement) Rules of 2016.
Social: The Companies Act of 2013 (which focuses on corporate social responsibility, board diversity, and
employee welfare); The Minimum Wages Act, 1948, The Plantation Labour Act, 1951, The Building and
Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
Governance: Corporate governance provisions of the Companies Act, 2013, the Securities and Exchange
Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Prevention of
Money Laundering Act, 2002, and the Prevention of Corruption Act, 1988.
Some of these legislations have been amended in recent years to enhance the reporting and compliance
requirements for ESG. It is important to note that the Companies Act, 2013, has been amended to require
mandatory Corporate Social Responsibility (CSR) spending for eligible companies, thereby fostering social
initiatives. Additionally, the SEBI Listing Regulations have implemented improved ESG disclosures for listed
companies, which encompasses topics such as sustainability reporting, board diversity, and business
responsibility.

ESG Reporting Requirements – Corporates

Background and Relevance:
With the growing environmental concerns around the world, it has become imperative for the modern-
day corporations to carefully look after their negative environmental impact and ways to curb it.
Highlight any pre-existing ESG initiatives (CSR, voluntary reporting).
The government and its affiliated regulatory bodies act as guardians of the system that regulates the
functioning of these enterprises; thus, in light of the current landscape, governments across the world
have to amend their laws in line with the dynamic developments of ESG and its relationship with the
companies.
The Indian government and agencies have been proactive in promoting the incorporation of numerous
ESG reforms into the country's business ecosystem. This section explores the numerous guidelines issued
by Indian authorities to streamline ESG reporting practices in India. You can understand it as a
predetermined structure that helps companies communicate their commitment to sustainable practices
and ethical business operations.
The current state of ESG reporting practices for various business entities in India can be described as
following –
Business Responsibility and Sustainable Report (BRSR)
On May 10, 2021, the Securities and Exchange Board of India issued a circular that mandated the top 1000
publicly listed companies, according to their market capitalisation, to compulsorily file a BRSR as a
replacement of existing Business Responsibility Report, starting from FY 2022–23 in their annual reports. It
directs these companies to publish information pertaining to ‘National Guidelines on Responsible
Business Conduct’, which is bifurcated into nine principles and each principle is divided into essential and
leadership indicators.
The key various reporting requirement for the nine principles of National Guidelines on National
Guidelines on Responsible Business Conduct’Responsible Business Conduct (NGRBC) are as follows –
Principle 1: Business Should Conduct and Govern Themselves with Ethics, Transparency and
Accountability – It covers general details about the company’s management and structures. Companies
are required to report the composition of their board of directors, ethics policies, internal and stakeholder
grievance redressal mechanisms, internal bodies and committees, and their approach to accountability.
Principle 2: Businesses Should Provide Goods and Services That Are Safe and Contribute to Sustainability
Throughout Their Life Cycle – This entails the details about the processes involved in making of the
company’s products like safety and quality control. It also requires to reveals information about the
implications of its activities like sourcing, manufacturing, distributing etc. Moreover, the details of
fostering circular economy practices like recycling, recovery and others is also required.
Principle 3: Businesses Should Promote the Well-being of All Employees – This principle revolves around
the employee and labour welfare conditions in the organisation like working hours, training sessions,
diversity, health & safety, leave facilities, turnover rate and many more indicators which can help to map
out the importance given to the human resource of the organisation.
Principle 4: Businesses Should Respect the Interests of, and Be Responsive Towards All Stakeholders,
Especially Those Who are Disadvantaged, Vulnerable, and Marginalised – The key focus of this principle is
on the needy communities which are in close relation with the company’s operations. This requires
reporting of various steps which include identifying and involving stakeholders, as well as engaging with
the community through development projects, investments, and other synergetic partnership with the
local people.
Principle 5: Businesses Should Respect and Promote Human Rights – It is vital for the company to obey to
national and global human rights laws, as it is a separate legal entity in itself amongst the society. This
consists the analysis of the company's human rights impact and the methods to eliminate any unethical
practices.
Principle 6: Businesses Should Respect and Make Efforts to Protect and Restore the Environment – The
accounting of environmental impact of the companies in terms of waste disposal, sources of energy and
water consumption, and all scopes of greenhouse gas emissions. It also includes the targets and
actionable strategies in order to achieve better sustainability goals.
Principle 7: Businesses, When Engaged in Influencing Public and Regulatory Policy, Should Do So in a
Responsible Manner – This principle is primarily concerned with the engagement of companies with the
public and bureaucratic entities in the country. The company is required to reveal the facts about its
lobbying activities, political contributions, and other forms of engagement with these stakeholders.
Principle 8: Businesses Should Support Inclusive Growth and Equitable Development – The company's
contributions to the local economic development in terms of infrastructure, employment, and other
aspects, as well as disclosures regarding poverty and inequality reduction.
Principle 9: Businesses Should Engage with and Provide Value to Their Customers and Consumers in a
Responsible Manner – It is critical for any business to keep its operations in line with consumers' needs in
a responsible manner. Therefore, this principle aims to capture reports on customer feedback and
satisfaction, compliance with the consumer rights issued in 2019, and non-indulgence in any anti-market
practices.

Some additional key details about the BRSR regulations are as follows –
Companies are only required to fill in the questions which are relevant to their mode and type of business
or the industry of operation.
Company can choose to not answer leadership related and voluntary
Business Responsibility and Sustainable Report Core (BRSR Core)
The BRSR core is a new subgroup under the existing BRSR, comprising of several Key Performance
Indicators under 9 ESG attributes. It has been designed after evaluating the Indian market scenario
focused on the complex value chains and vision of the Indian Economy. The SEBI has also tried to align
these reporting standards with global comparability by adjusting the values for Purchasing Power Parity.
The top 1000 listed entities by market capitalisation are required to comply to the updated BRSR format
from FY 2023-24. However, the reasonable assurance of BRSR core shall be taken from the following
specified glide path –

The nine new attributes covered in the BRSR core guidelines are as follows –
Companies are required to comprehensively record Scope 1, Scope 2, and Scope 3 emissions, along with
the estimated future targets for reduction.
Energy drawn for both direct and indirect operations must be recorded and classified based on its source
—renewable or non-renewable—along with the utilization and efficiency parameters for them.
Entities need to measure the consumption and methods used to treat water in terms of filtration and
discharge, along with efficiency parameters related to water usage.
Companies must account for and classify waste based on indicators such as generated, recycled,
hazardous, etc., at every stage of the product's value chain until the consumer uses it.
Measure the types of pollutants released into the air during the operations.
The BRSR Core guidelines have standardised the measurement of workplace safety and employee health
standards, and companies are now required to report their numbers based on the lost time injury
frequency rate (LTIFR), safety initiatives, and various other factors.
Reports must also include the length of time employees spend in training sessions, their participation, the
main training topics, and the amount of company resources used.
The company needs to account for the diversity number not just in terms of gender but especially in
terms of abled categories for all board members, employees, and labour.
In an attempt to view the grass-root impact of these top companies, the government has asked to account
for the intervention successes in small towns and rural areas: wages paid, aid extended, uplifting
communities, and others.
ESG Reporting Requirements – Financial Institutions
The Guidelines on Climate Risk and Sustainable Finance and the accompanying Disclosure Framework on
Climate-Related Financial Risks are the primary instruments through which the Reserve Bank of India (RBI)
mandates Environmental, Social, and Governance (ESG) reporting requirements for financial institutions.
Master Directions – Priority Sector Lending (PSL) – Targets and Classification (Updated as on June 21, 2024)
- Link

These master directions under RBI’s PSL include sectors like Social Infrastructure and Renewable Energy
as key areas of focus. This promotes the development of these sectors and also invites foreign
investments through incentives, thus allowing for a special emphasis in these domains. RBI has time and
again revised these guidelines, revising its targets. These directions have been in line with the RBI’s
Discussion Paper on Climate Risk and Sustainable Finance (Link). This shows that RBI will modify its
directives to slowly align with the international and domestic NDCs and promote sustainable finance.
Draft Disclosure Framework on Climate-Related Financial Risks, 2024 (Link)
This framework entails a set of details that all REs must provide to all their stakeholders on an annual
basis to improve transparency and showcase the efforts undertaken by the entity in promoting social
initiatives.

In their annual reports and financial statements, banks are required to disclose their exposure to climate-
related risks. Banks are advised to ensure that their disclosures are consistent with international
frameworks, such as the Task Force on Climate-related Financial Disclosures (TCFD). The report may take
use of the 11 recommendations of the TCFD, especially with regard to the 4 thematic areas
Governance: Disclose the organisation’s governance around climate-related risks and opportunities
Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning where such information is material
Risk management: Disclose how the organisation identifies, assesses and manages climate-related risks
Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-related
risks and opportunities where such information is material.
The obligation to disclose the strategies and measures implemented to mitigate climate-related risks,
including governance structures and risk management processes.
RBI also emphasises on the REs declaring their potential risks related to climate change and make use of
Scenario Analysis as a tool to better report and recognise risks and take suitable actions. This kind of
scenario analysis is highly relevant with regard to treasury operations to understand what all risks might
affect the future profit-making ability of an enterprise and share that perspective with the stakeholders to
dictate a plan of action.
These risks are classified as –
Credit risk: The value of assets held by the banks' customers may be impaired by the increasing frequency
and severity of extreme weather events, or by the impact of supply chains on the operations and
profitability of customers, as well as their viability.

Market risk: Subject to a decrease in valuation and an increase in volatility in their investments as a result
of changes in investor preferences or adverse effects on the fundamental economic activity caused by
climate change.
Liquidity risk: The potential for increased demand for liquidity in response to extreme weather events or
the challenges that may arise when liquidating assets due to their adverse effects.
Operational risk: The disruption of business continuity as a result of the impact on the bank's
infrastructure, processes, personnel, and systems. Furthermore, stakeholders who have experienced
climate-related losses and are now seeking to recoup those losses are exposed to claims.

This kind of assessment is directly related to treasury as a whole and affects their projections with regard
to the future performance of an enterprise. RBI has also worked on studies with climate stress testing and
scenario analysis (link).
Treasury Management & ESG
Exiting Systems and Key Changes:
Prior to the ESG regulations, treasury operations in India were mainly focused on traditional financing
practices with limited or no consideration for ESG operations. All liquidity operations like Cash Flow
Management, Investment Portfolio Management, Risk Management and Financial Reporting and
Compliance were done from a topline perspective only with profit as the leading motive. Stakeholder
interaction was focused on the financial performance and proliferation of the business. There were rarely
any enterprises that had a social perspective as their key principle.
However, ESG operations were not completely absent. Certain ESG practices were already in place before
the concept of ESG was popularised in India. This included Corporate Social Responsibility (CSR) practices
mandated by The Companies Act, 2013 and the Business Responsibility Reporting (BRR) in 2012 by SEBI.
BRR required only the top listed companies to give details about their performance in social and
environmental factors and did not include the detailed disclosures as are now under the BRSR framework.
Other than this, some companies voluntarily chose ESG Reporting using international frameworks like GRI
to show their commitment to safer environmental practices. This practice was primarily supported by the
international businesses and corporates, seeing whom the bigger Indian conglomerates started reporting
their social performance. Similarly, green bonds had started to gain traction in India but the market was
relatively nascent and lacked a comprehensive framework.
After the introduction of the ESG regulations, treasury operations have shifted their focus to a more
holistic and social perspective. This era of ESG regulations has brought significant changes across treasury
operations –
Investment Strategies:
Treasury departments nowadays are now actively diversifying their investment portfolios to include green
bonds, renewable energy projects, and other sustainable financial instruments. This has been primarily
driven by mandatory allocations under RBI’s PSL guidelines.
ESG factors like environmental impact, social responsibility, and governance practices are now integrated
in the investment analysis and decision-making process
Treasury departments are partnering up with ESG fund managers to help them with sustainable
investment practices.
Risk Management Practices:
Climate risk has now been integrated in the risk management framework and treasuries are including
climate risk assessment tools in their portfolios to ensure overall stability. This includes risks like changes
in carbon prices/taxes, extreme weather events, etc.
To comply with the new ESG reporting frameworks, treasuries are now conducting internal audits,
collecting ESG data, and are engaging with external assurance providers to validate their findings and
suggestions.
Reporting Requirements:
Regulatory bodies now require detailed ESG disclosures in the annual reports. This includes information
on energy consumption, water consumption, employee diversity, etc. Treasury departments play a key
role in ensuring the completeness and accuracy of this data.
Climate Risk related disclosures as suggested by the RBI in the companies’ annual reports necessitates the
development of new reporting frameworks and methodologies which the treasury departments are
responsible for identifying and reporting.
Overall Impact and Strategic Implications:
ESG has a multifaceted impact on treasury management in Indian companies, significantly altering their
operations at a fundamental level, encompassing planning, decision-making, and the future trajectory.
Strategic Planning
Treasury departments have included ESG pillars as a fundamental block for policy formulation. The
treasury department must align its targets and visions with the firm's broader ESG commitments, as well
as with the regulations enforced by the government and other authorities.
Aligning ESG goals with the company's strategy helps the treasury department reduce external
environmental risks and enhance its reputation among the public and investors. This also helps the
company tap into new markets by leveraging its existing brand image.
India treasury departments’ strategies and rules in sustainable finance closely align with the Global
Standards after the series of amendments by SEBI. This has helped Indian companies attract overseas
capital, especially from ESG-currency investors, which offer funds at very attractive rates in contrast to
domestic or ordinary foreign investors.
Decision Making Progress
ESG factors have already established a comfortable and permanent position in most of the country's
leading firms' investment decisions. Assessing environment-related financial risks associated with the
company and considering the potential social and other positive impact of the investment, in addition to
profits, accomplishes this.
The various ESG guidelines, which are continuously evolving and quite hard to predict accurately, have
made risk management more complex than ever. In their regular work, treasury departments must
comply with ESG risk assessment and try to curb the risks as and when they arise.
Many of these domestic laws have forced the big corporations to set up new ESG departments and
committees to look after the reporting and disclosure standards as directed by the government. The law
also requires these companies to establish separate internal audit and management systems.
Future Trajectory
ESG regulations have helped the companies revisit their business operations and discover procedural
breakthroughs to reduce costs and increase innovation for better growth opportunities.
The lack of standardised metrics and frameworks, coupled with their abstract measurement and reporting
techniques, pose a difficulty for the companies to keep appropriate quality data for accurate depiction
withing the treasury department.
Conclusion
While domestic ESG regulations have a long way to go and still require a lot of improvements to land at
par with international regulations. The current mix of regulations and laws provides a good start to the
Indian ESG reporting framework. Treasury, which forms the backbone of any enterprise’s operations, will
have a key role to play in complying with the ESG standards set by the regulatory bodies.
SEBI’s BRSR Core framework will provide for more transparent communication between different business
stakeholders. With the support of the RBI's policy directives, Indian enterprises will be able to report their
ESG progress, especially in the financial domain, to be at par with international initiatives. The regulatory
guidelines and law mandates, while modifying the base of the treasury operations, also provide for an in-
depth analysis of the company’s operations like never before. Understanding the social and
environmental costs of its operations will allow businesses to look for sustainable solutions, which will
eventually return them with higher social profits.
Modifications in treasury operations require a larger team, collaboration with external organisations,
continuous monitoring of operations, and a society-first approach by businesses. These regulatory
changes will allow for greater social development, especially in the disadvantaged sectors of society.
Emphasis on ESG in treasury operations will lead to better investments and socially sound and holistic
growth in the future for the enterprise and the economy.
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