June 04, 2024

Advancing ESG: India’s New Disclosure Frameworks by RBI and SEBI


  • RBI and SEBI have introduced frameworks aimed at integrating climate-related financial risks into India’s regulatory regimes, aligning with global standards and enhancing transparency and accountability within the financial sector.

  • RBI’s draft disclosure framework mandates regulated entities to disclose information on climate-related financial risks and opportunities, covering thematic pillars such as governance, strategy, risk management, and metrics/targets, with a phased implementation plan.

  • SEBI’s BRSR guidelines aim to simplify compliance while maintaining rigorous sustainability reporting standards, proposing modifications such as redefining the value chain, introducing Green Credits reporting, and replacing “assurance” with “assessment” to reduce compliance burdens.


Climate change presents profound risks to the global financial system, influencing asset values, financial markets, and institutional stability. As the effects of climate change intensify, regulatory bodies worldwide are shifting from voluntary climate risk disclosures to mandatory reporting, with a view to ensure financial stability and resilience. In India, the Reserve Bank of India (“RBI”) and the Securities and Exchange Board of India (“SEBI”), have both introduced frameworks aimed at integrating climate-related financial risks into their regulatory regimes. This article examines these frameworks, highlighting their significance, scope and implementation, while addressing the challenges they present.

A. RBI’s Draft Disclosure Framework on Climate-Related Financial Risks, 2024

Recognizing the critical impact of climate-related risks on financial stability, RBI has introduced a draft disclosure framework, 2024 for Regulated Entities (“RE”).1 This framework aligns with global standards, such as the EU’s Corporate Sustainability Reporting Directive (“CSRD”)2 and the US SEC’s climate disclosure rules,3 ensuring that India’s financial sector remains competitive and resilient. The disclosure framework represents a significant stride towards the integration of climate risks and opportunities within the Indian banking ecosystem. It mandates REs to disclose information on their climate-related financial risks and opportunities, promoting early assessment and management. This approach aims to ensure consistent and comparable disclosures, mitigating the mispricing of assets and the misallocation of capital and fostering market discipline.


The RBI framework mandates the following REs to disclose information on climate-related financial risks and opportunities:4

  1. All Scheduled Commercial Banks (SCB), excluding Local Area Banks, Payments Banks, and Regional Rural Banks.

  2. All Tier-IV Primary (Urban) Co-operative Banks (UCBs).

  3. All All-India Financial Institutions (AIFI), (viz. EXIM Bank, National Bank for Agriculture and Rural Development (NABARD), National Bank for Financing Infrastructure and Development (NaBFID), National Housing Bank (NHB), and Small Industries Development Bank of India (SIDBI)).

  4. All Top and Upper Layer Non-Banking Financial Companies (NBFCs).

Adoption of these guidelines remains voluntary for entities other than those specified in the above-mentioned categories. However, foreign banks must make disclosures specific to their operations in India.

Thematic Pillars of Disclosure:

The REs must disclose under the following four key thematic schemes, which include, Governance, Strategy, Risk Management and Metrics and Targets. The RBI seeks disclosures on a two-tier level: (a) baseline; and (b) enhanced disclosures. These disclosures highlight accountability and demand a potential shift in the corporate governance process.5

Thematic Pillar


Key Disclosure Requirements


Details the governance processes, controls and procedures used to manage climate-related financial risks and opportunities.

  • Board oversight of climate-related risks and opportunities.

  • Senior Management’s role in assessing and managing climate-related risks and opportunities.


Describes the RE’s strategy for managing climate-related financial risks and opportunities, including identification of risks and opportunities over different time horizons.

  • Identified climate-related risks and opportunities over short, medium, and long term.

  • Impact of these risks and opportunities on business, strategy and financial planning.

  • Resilience of the strategy under different climate scenarios.

Risk Management

Outlines the processes to identify, assess, prioritize, and monitor climate-related financial risks and opportunities and their integration into the overall risk management framework.

  • Policies and processes for identifying, assessing, prioritizing and monitoring climate-related financial risks.

  • Processes used for managing climate-related risks.

  • Integration of climate-related risk management into overall risk management processes.

Metrics and Targets

Details performance metrics related to climate-related financial risks and opportunities, including progress towards climate-related targets.

  • Metrics used to assess climate-related risks and opportunities.

  • Scope 1,6 Scope 27 and Scope 38 GHG emissions- Targets for managing climate-related risks and progress against these targets.

Implementation Plan:

Recognizing the need for a pragmatic and phased approach, RBI has outlined a staggered implementation plan for the framework:


Governance, Strategy, and Risk Management

Metrics and Targets

SCBs, AIFIs, Top and Upper layer NBFCs

FY 2025-26 onwards

FY 2027-28 onwards

Tier IV UCBs

FY 2026-27 onwards

FY 2028-29 onwards

*Disclosure requirements for other REs are yet to be announced.

B. SEBI’s Business Responsibility and Sustainability Report (BRSR) Guidelines

SEBI has also introduced frameworks to enhance corporate transparency and accountability regarding sustainability practices. Under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, SEBI implemented the BRSR guidelines in 2021.9 These guidelines aim to align Indian corporate reporting with global best practices and respond to the growing investor demand for sustainable investment options.

Recently, SEBI has issued a consultation paper to seek public comments on recommendations by an Expert Committee regarding the BRSR. The consultation paper aims to simplify regulatory compliance and reduce associated costs to companies, thereby facilitating ease of doing business for listed entities.10

One of the central proposals of the committee is to redefine the value chain in terms of its upstream and downstream partners. The new definition proposes that the value chain should include partners representing 2% or more of the listed entity’s purchases or sales by value. An alternative proposal suggests that the value chain should encompass partners representing 2% or more of purchases or sales by value, but cumulatively covering at least 75% of the total purchases or sales. This alternative is intended to reduce the number of value chain partners from a potential maximum of 50 to approximately 38, thereby simplifying compliance while ensuring significant coverage of key partners. Additionally, for the first year of ESG disclosure reporting for the value chain in FY 2024-25, reporting previous year numbers will be voluntary. The proposal also suggests adopting a “voluntary” disclosure approach instead of the current “comply or explain” approach for ESG disclosures and their assurance.

Another notable proposal involves the introduction of Green Credits reporting. This follows a notification from the Ministry of Environment, Forest, and Climate Change regarding Green Credits.11 The proposal suggests adding a leadership indicator under BRSR to report the number of Green Credits generated by both the company and its value chain partners. This measure aligns with national environmental policies and promotes transparency in sustainability efforts.

The third significant proposal is to replace the term “assurance” with “assessment” in BRSR-related LODR regulations and SEBI circulars. For FY 2023-24, companies would have the option to undertake either an
“assessment” or “reasonable assurance” of BRSR Core disclosures. From FY 2024-25 onwards, “assessment” will replace “assurance”. An alternative proposal offers flexibility, allowing companies to choose between “assessment” or “assurance” from FY 2023-24 itself. This change is aimed at reducing the compliance burden, as “assessment” is generally less costly and demanding than “assurance”, thus facilitating easier adherence to reporting requirements without compromising the quality of ESG data.

SEBI’s consultation paper presents well-considered modifications to the BRSR framework, designed to ease compliance burdens while maintaining rigorous sustainability reporting standards.


Both RBI and SEBI frameworks mark progress towards integrating ESG factors into India’s financial system. These frameworks aim to enhance transparency, accountability and resilience within the financial sector by mandating disclosures on governance, strategy, risk management, and metrics related to climate-related financial risks and opportunities.

The RBI’s draft disclosure framework on climate-related financial risks reflects a global trend towards mandatory reporting to address the growing risks posed by climate change. While the framework sets out clear thematic pillars for disclosure, its effectiveness may be hindered by challenges such as data limitations, non-comparability of climate risk assessment methodologies, and resource constraints. Without adequate guidance and support, REs may struggle to meet the stringent reporting requirements, leading to incomplete or inconsistent disclosures.

Similarly, SEBI’s BRSR guidelines seek to enhance corporate transparency and accountability regarding sustainability practices. While the proposed modifications, such as redefining the value chain and introducing Green Credits reporting, demonstrate SEBI’s commitment to aligning with global best practices, challenges remain in ensuring widespread compliance and standardization of reporting frameworks.


  1. Data limitations and non-comparability: Both frameworks face challenges related to the availability and comparability of data. The lack of standardized reporting frameworks and inconsistent data collection methodologies hinder the assessment and comparison of climate-related risks across different entities. The non-comparability of climate risk assessment methodologies presents a significant challenge for both frameworks. Different entities may use varying methodologies to assess climate-related risks, making it challenging to compare risk assessments and identify best practices. Standardizing climate risk assessment methodologies will be crucial for ensuring consistency and reliability in risk reporting and decision-making.

  2. Resource constraints and expertise gaps: Many REs lack the necessary resources and expertise to conduct comprehensive climate risk assessments and comply with stringent reporting requirements. This challenge is exacerbated by the broad scope of the frameworks, which require REs to report not only their emissions but also those of the firms within their portfolios. Addressing these gaps will require significant investments in technology, training and capacity-building initiatives to enhance REs’ ability to effectively manage climate-related risks.

  3. Compliance burden: Effective governance structures and compliance mechanisms are essential for ensuring the integrity and reliability of disclosures. However, the phased implementation plans outlined by both the RBI and SEBI may pose challenges for smaller entities, which may struggle to meet the requirements within the stipulated timelines. Establishing robust governance structures for handling ESG risks within REs will be crucial for ensuring that ESG considerations are fully integrated into operations and decision-making processes.

  4. Overhaul of portfolio evaluation methodologies: The implementation of the frameworks will require a significant overhaul of existing portfolio evaluation methodologies. REs will need to incorporate climate risk into credit risk assessment to make more informed investment decisions. This involves developing new methodologies for assessing physical and transition risks and integrating climate-related risks into business strategy and decision-making processes.

  5. Scenario analysis: The frameworks emphasize the need for REs to conduct scenario analysis to evaluate the potential impacts of different climate change scenarios on their investments and operations. While scenario analysis provides valuable insights, it demands sophisticated modelling and data analysis capabilities, which many REs currently lack. Developing these capabilities will be necessary for REs to effectively manage and disclose climate-related risks.

  6. Transition plans: The frameworks require REs to develop transition plans to move away from high-risk areas and capitalize on emerging opportunities. However, the success of these plans relies heavily on the quality and reliability of the data gathered through emission reporting and risk assessment. Ensuring access to accurate and comprehensive data is crucial for the effective implementation of transition plans and the successful transition to a low-carbon economy.


Despite these challenges, the RBI and SEBI frameworks represent critical steps towards building a more sustainable and resilient financial ecosystem in India. It should enable a more robust sustainable finance integrating environmental, social, and governance (ESG) factors into investment decisions within the financial sector. This approach aims to promote long-term investments in sustainable economic activities and projects. Environmental considerations encompass efforts like climate change mitigation, biodiversity preservation, pollution prevention, and embracing the circular economy. Social aspects involve addressing issues like inequality, inclusivity, labor relations, investing in people and communities, and safeguarding human rights. Governance matters encompass the structures and practices of both public and private institutions, ensuring that social and environmental concerns are factored into decision-making processes.

Addressing the identified challenges will require concerted efforts from regulators, REs, and other stakeholders to provide guidance, support, and resources needed for effective implementation. By encouraging collaboration and innovation, India can strengthen its position as a leader in sustainable finance and contribute to global efforts to mitigate climate change.

Within India’s framework, sustainable finance is seen as financing that fosters economic growth while lessening environmental strain, aligning with the goals of the European Green Deal. This approach integrates social and governance dimensions. Moreover, framework laid down by SEBI and RBI focuses on encouraging transparency regarding ESG-related risks that could affect the financial system and advocates for managing these risks through appropriate governance mechanisms within financial and corporate spheres.


Sehar Sharma, Maulin Salvi, Rahul Rishi and Sahil Kanuga

You can direct your queries or comments to the authors.


2 regulation-and-supervision/ financial-services-legislation/ implementing-and-delegated-acts/ corporate-sustainability-reporting-directive_en


4The REs are required to disclose the relevant information on a standalone basis, rather than on a consolidated basis.

5 en-in/blog/towards-resilience -navigating-rbis-climate- related-disclosure-framework -for-indian-financial-entities/

6Scope 1: greenhouse gas emissions are direct greenhouse gas emissions that occur from sources that are owned or controlled by the RE.

7Scope 2: greenhouse gas emissions are indirect greenhouse gas emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the RE. Purchased and acquired electricity is electricity that is purchased or otherwise brought into the RE’s boundary. These emissions physically occur at the facility where electricity is generated.

8Scope 3: greenhouse gas emissions” are indirect greenhouse gas emissions (not included in Scope 2 greenhouse gas emissions) that occur in the value chain of an entity, including both upstream and downstream emissions.

9 legal/circulars/ may-2021/business- responsibility-and- sustainability-reporting -by-listed-entities_50096.html

10 reports-and-statistics/ reports/may-2024/consultation- paper-on-the-recommendations-of -the-expert-committee-for-facilitating -ease-of-doing-business-with- respect-to-business-responsibility-and-sustainability-report-brsr-_83551.html

11 files/file/notifcation %20on%20green%20credit.pdf


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