JPMorgan says ‘trailblazing’ rules to boost India’s ESG market
India is among the first in the world to regulate ESG rating providers and the country’s minimum requirement for funds to invest — according to their stated strategy — is “a high bar,” said Hannah Lee, JPMorgan’s head of ESG equity research for the Asia-Pacific region. “Where India stands out in terms of being trailblazing is probably its level of ambition and some of the thresholds that it has,” she said in an interview.
India rolled out several measures over the past two years to regulate its market for green and other assets, most recently allowing domestic fund managers to launch plans under six types of ESG strategies.
The rules are part of a broad campaign to increase oversight. Earlier this year, the country was rocked by a short-seller report alleging poor governance and systemic mismanagement at ports-to-power conglomerate Adani Group.
According to the new rules, at least 80% of total fund assets must be invested in equity and equity-related instruments that align with the stated strategy.
It makes India’s the highest benchmark in Asia, Lee said. In Singapore and the Philippines, the threshold is about 67%.
The European Securities and Markets Authority has proposed an 80% threshold for all funds with names that use ESG-linked labels.
Europe’s strictest designation for sustainable funds, Article 9 or “dark green,” requires 100% alignment, a high bar that led some asset managers to reclassify their funds under the more lightly restricted category Article 8, or “light green.”
Lee doesn’t see that as a problem for India. “Regulation of ESG funds has helped develop ESG investing in many markets,” she said, and noted that in Europe, “flows to Article 9 products remained positive all through 2022.”
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