ESG in APAC - India by Khaitan & Co

Please click on the podcast above for a snapshot of the three key themes of ESG reporting, transition planning and greenwashing in respect of India. Scroll down for further information on each key theme.

A. ESG Reporting

1. Are there legal or regulatory requirements for companies to make ESG disclosures in your jurisdiction?


2. What are the key legislative and regulatory sources for ESG disclosure requirements and to whom do they apply?

ESG disclosure requirements are aimed at the top 1,000 public listed companies by market capitalisation. The Indian market regulator – the Securities and Exchange Board of India (SEBI) has, pursuant to an amendment to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandated the top 1,000 listed companies (by market capitalisation) to make mandatory ESG disclosures under the framework of Business Responsibility and Sustainability Report (BRSR), which is required to be reported on an annual basis. The structure of the BRSR format is segregated under essential (mandatory) and leadership (voluntary) indicators. The leadership indicators in the BRSR format also include disclosures related to the value chain of the listed entities.

The issuance and listing of green bonds is governed by the SEBI (Issue and Listing of Non-Convertible Securities) Regulations 2021, read with SEBI’s Operational Circular for Issue and Listing of Non-Convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper, dated 10 August 2021, pursuant to which the SEBI has mandated issuers of green bonds to: (a) disclose environmental objectives of the issue under the offer documents; (b) indulge in continual disclosure of performance; and (c) verify utilisation of proceeds.

SEBI has mandated mutual funds to disclose their ESG policies and practices under offer documents.

For private companies, public unlisted companies, limited liability partnerships, partnership firms and other types of entities, ESG disclosures have not yet been mandated by law in India.

3. Are the requirements mandatory or do they apply on a comply-or-explain basis?

The disclosure requirements under the BRSR framework (save for the voluntary leadership indicators) are mandatory for the top 1,000 listed companies by market capitalisation.

Per the SEBI’s recent framework “BRSR Core – Framework for Assurance and ESG Disclosures for Value Chain” dated 12 July 2023 (BRSR Core Circular), SEBI has introduced BRSR core, which is a subset of BRSR and provides 9 key performance indicators (BRSR Core). Per the BRSR Core Circular, the top 250 listed companies by market capitalisation are required to: (a) disclose Scope 3 GHG emissions on a comply-or-explain basis from financial year 2024-2025; and (b) meet assurance requirements for Scope 3 GHG emissions on a comply-or-explain basis from 2025-26, each in relation to the BRSR Core indicators.

For financial institutions issuing green bonds, there is a requirement of appointing a third party reviewer / certifier to certify project evaluation and selection criteria, which is applicable on a comply-or-explain basis for a period of 2 years.

4. Which aspects of ESG do the requirements focus upon?

For the top 1,000 listed companies by market capitalisation, environmental, social and governance aspects are all covered. For example, the BRSR mandates disclosures relating to energy and water consumption, Scope 1 and Scope 2 GHG emissions, waste management, extended producer responsibility, environmental impact assessments undertaken by the reporting companies and general disclosures relating to the environmental impact of the respective companies’ operations.

For institutions issuing green bonds, the focus is on the environment and climate aspects.

5. Are the disclosure requirements based on international standards? If so, which one(s)?

The BRSR framework has adopted the United Nations Sustainable Development Goals and draws inputs from several international sustainability reporting frameworks such as the GRI, SASB and TCFD.

6. Are there any mandatory requirements for the disclosure of Scope 3 GHG emissions?

For BRSR Core indicators, the top 250 listed companies by market capitalisation are required to disclose (from financial year 2024-25) Scope 3 GHG emissions on a comply-or-explain basis, and obtain assurances (from financial year 2025-26) on a comply-or-explain basis.

The Scope 3 GHG emissions disclosure and assurance requirements have been introduced very recently by the SEBI (under the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations 2023, dated 14 June 2023) and the BRSR Core Circular.

7. Are there assurance requirements?

Assurance requirements have been prescribed in relation to the BRSR Core elements: (a) for the top 150 listed companies by market capitalisation from financial year 2023-2024, which shall be gradually extended to the top 1,000 listed companies by market capitalisation by financial year 2026-27; and (b) in relation to value chain / Scope 3 GHG emissions disclosures for the top 250 listed companies by market capitalisation.

8. Are voluntary ESG disclosures customary?  

Yes. In our experience, we see companies aligning their disclosures under international reporting frameworks and making voluntary ESG disclosures.

Several listed companies that are not mandatorily required to make ESG disclosures are opting to voluntarily make such disclosures. Similarly, many unlisted companies and multinational companies also make such disclosures on a voluntary basis given investor sentiment and stakeholder expectations.

9. Is there a local taxonomy? Is it mandatory and what is its scope of application?

No, but regulators have indicated development of a green taxonomy.

10. Are there plans to adopt the ISSB sustainability and/or climate-related disclosure standards? If so, to what extent will the standards be mandatory, to whom will they apply and what is the timeline?

SEBI has clarified that while undertaking BRSR disclosures, entities already preparing and disclosing sustainability reports based on internationally accepted reporting frameworks (e.g. GRI, Integrated Reporting Framework and TCFD) may refer to disclosures made under these frameworks. For instance, many entities in India follow the Carbon Disclosure Project (CDP) disclosure system on a voluntary basis, and CDP questionnaires are, to some extent, aligned with the environment-based questions in the BRSR.

In our experience, we see companies aligning their disclosures under international reporting frameworks (including CDP and TCFD) and therefore, they report on climate change related aspects accordingly.

To date, there has been no indications from regulators that the ISSB standards will be specifically incorporated into local disclosure requirements, though there may be alignment in the future.

11. Other upcoming developments / direction of travel

Regulators may adopt a truncated form of the BRSR called BRSR Lite, which may be used by unlisted companies or large public companies on a voluntary basis to begin reporting on sustainability-related issues. We also expect to see an increase in voluntary disclosures as investor interest increases in their portfolio companies. Further, we expect more alignment with global climate-related disclosures in the future, including that of ISSB.

We expect SEBI to issue guidelines to: (a) govern core ESG ratings carried out by ESG Rating Providers (ERPs) and have a broader regulatory framework for ERPs; and (b) regulate ESG investment schemes and compliances by asset management companies.

B. Transition planning and net zero

1. Has your jurisdiction set decarbonisation targets and strategies?

Yes, as announced at COP26 in Glasgow, India has announced its commitment to net zero emissions by 2070. The Indian government also plans to become a net exporter of energy in the coming years.

The Indian government has also outlined its new 2030 decarbonisation targets and strategies to: (a) achieve non-fossil energy capacity to 500 GW by 2030; (b) meet 50% of its energy requirements from renewable energy by 2030; (c) reduce total projected carbon emissions by one billion tonnes by 2030; and (d) reduce the carbon intensity of its economy by less than 45%.

2. Are there carbon trading markets? If so, please give details. If not, are there plans for such markets?

Not yet, although there is an energy-savings based trading mechanism as mentioned in Q&A B.4 below.

However, the (Indian) Energy Conservation Act, 2001, as amended in 2022 introduces the concept of a carbon credit trading scheme (CCTS) pursuant to which the central government may issue carbon credit certificates to entities registered under the CCTS, which can thereafter, trade in carbon credit certificates.

The CCTS has not yet been implemented. The draft CCTS envisages the setting up of an Indian carbon trade credit market and provides for classification of entities as registered and obligated entities. The CCTS envisions a voluntary mechanism, as well as a compliance mechanism – and is mandatory for obligated entities. Obligated entities are registered entities who are notified under the compliance mechanism of the CCTS, and which shall have to reduce their GHG emission intensity as notified by the Central Government. Export of carbon trade credit certificates is presently prohibited. The Indian Carbon Market Governing Board to be set up under the CCTS shall be the administrator for the Indian Carbon Market and shall issue carbon credit certificates, and the Central Electricity Regulatory Commission shall regulate matters relating to trading of carbon credit certificates.

3. Are there mandatory requirements for transition plans and/or their disclosure? If so, please give details (including whether there is any standard or guidance on transition plans and/or requirement to consider the social impact of the plan). If not, are there plans for such requirements?

It is not mandatory to have a transition plan.

However, Section 134(m) of the (Indian) Companies Act, 2013 requires that reports issued by the board of directors of a company provide details such as conservation of energy and corporate social responsibility initiatives undertaken by a company during the year.

Further, as set out in Q&A A.2 above, the SEBI has mandated the top 1,000 listed companies by market capitalisation to make mandatory ESG disclosures under the BRSR, which includes reporting parameters such as greenhouse gas emissions as well as breakdowns of energy consumed from renewable and non-renewable sources.

4. Are there mandatory requirements to set, meet and/or disclose climate-related targets? If so, please give details. If not, are there plans for such requirements?

Presently, companies are not required to set or meet climate-related targets. The draft CCTS (yet to be implemented) sets targets for reduction of GHG emissions and the Indian Energy Conservation Act, 2001, as amended in 2022 designates different shares of consumption for various types of non-fossil sources.

Mandatory renewable energy obligations have been prescribed under the (Indian) Electricity Act, 2003, which require specific consumers (e.g. power distribution companies and captive consumers) to procure a percentage of electricity from renewable sources.

The mandatory “Perform, Achieve and Trade” (PAT) scheme issued under the (Indian) Energy Conservation Act, 2001, also places obligations on designated consumers in specific energy intensive industries whose annual energy consumption is equal to or greater than the threshold limit specified by Central Government notifications, to meet energy saving targets through issued or purchased tradeable energy savings certificates. Under the Indian Energy Conservation Act, 2001, as amended in 2022, a proviso has been introduced to Section 14A of the principal Act to provide that any other person (other than designated consumers) may also purchase energy savings certificates on a voluntary basis.

5. Other upcoming developments / direction of travel

As set out above, the CCTS is proposed to be implemented soon and will involve the development of methodologies for estimation of carbon emissions reductions. Separately, guidelines to monitor, report and verify emissions are also proposed to be formulated.

C. Greenwashing risks

1. Are there any recent examples of legal proceedings, regulatory actions or investigations against or into greenwashing in your jurisdiction?


2. Are there any laws or regulations specifically dealing with greenwashing?

No, but some guidance does exist.

For instance, the SEBI has introduced stringent disclosure requirements (under its Circular dated 3 February 2023, “Dos and Donts Related to Green Debt Securities to Avoid Occurrences of Greenwashing”) for issuers of green debt securities, such as continuous monitoring, prohibition of utilisation of funds for non-green purposes, prohibition of misleading labels and highlighting green practices while hiding unfavourable information.

3. What are the likely grounds on which such proceedings, action or investigations can be instigated?

Likely grounds include:

(a) Failure to meet disclosure requirements under securities laws and regulations – e.g. providing materially false or misleading information in listing documents or other corporate and ESG disclosure documents such as the BRSR.

(b) Breaches of directors’ duties – e.g. Section 166 of the (Indian) Companies Act, 2013 requiring a director to act in the best interests of the company and towards protection of the environment.

(c) Claims for misrepresentation, misleading or false advertisement.

There are also risks of regulatory enforcement, for example, under codes / guidance issued by financial regulators on green debt securities and requirements on ESG disclosures.

4. Other upcoming developments / direction of travel

Presently, there have been no noteworthy greenwashing claims in India, however, this is expected to increase as reporting requirements become more robust and the sense of urgency on sustainability continues to grow.

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This material is provided for general information only. It does not constitute legal or other professional advice.