SEBI approves Mutual Fund companies to bring new category under ESG scheme, know what will be its benefits

The Securities and Exchange Board of India (SEBI) today permitted mutual funds to introduce five new categories under the ESG (Environment, Social, and Governance) scheme.
Apart from this, SEBI has also asked mutual fund companies to prepare a framework for this.
The five new categories that have been allowed to be created under ESG are exclusions, integration, best-in-class, positive screening and impact investing, and sustainable objectives.
SEBI issued a circular stating that the provision of a new category for ESG schemes would come into force with immediate effect.
SEBI said that these measures will facilitate green financing, as well as emphasize more disclosures and reduce greenwashing.
SEBI has mandated ESG schemes to invest at least 65 percent of the assets under management (AUM) in listed entities where BRSR (Business Responsibility and Sustainability Reporting) is assured at the core. According to the circular issued by SEBI, this requirement will be applicable from October 1, 2024.
Green financing aims to increase the level of financial flow (from banking, micro-lending, insurance, and investment) to sustainable development priorities from the public, private, and non-profit sectors.
ESG stands for Environment, Social, and Governance. Some companies meet environmental, social, and governance standards and have these standards in their portfolio. ESG funds look at the non-financial factors of a company.
For example, ESG funds look at whether the company's business is not having a bad impact on the environment, whether the company has a good relationship with society and stakeholders, whether the company is fulfilling corporate social responsibility, Etcetera. The fund managers then invest in companies with high standards.