Sustainability Audit, ESG Rating and Emerging Mandates from Government and Regulators: formula sheet

Key formulas

Limited assurance conclusion

Nothing has come to attention that the information is materially misstated

Negative-form wording. Fewer procedures, mainly enquiry and analytical review.

Reasonable assurance conclusion

Information is, in all material respects, fairly stated against the criteria

Positive-form wording. More evidence is gathered, including detailed testing and controls.

Elements of an assurance engagement

Three-party relationship + subject matter + suitable criteria + sufficient appropriate evidence + written report

The three parties are the assurer, the responsible party and the intended users. Remember this under ISAE 3000.

Typical audit flow

Plan → Understand and assess risk → Collect evidence → Evaluate → Report → Follow up

Use this order to structure any process answer.

Assurer requirements

Independence + competence + ethics + quality control

Without these the assurance is not credible.

Weighted ESG score (general form)

ESG score = Σ (issue score × issue weight), where the weights add up to 100%

This is the common logic, not one provider's exact formula. Each provider sets its own issues and weights.

Score versus rating

Score = number calculated; Rating = grade or category assigned from the score

Use this to answer the difference question in one line.

Direction of scales

MSCI: higher grade (AAA) is better. Sustainalytics: lower risk score is better

Do not say a high number is good for every provider.

Pillar build-up

E score + S score + G score, each weighted by industry materiality, gives the overall score

Pillar weights differ by industry.

Source of the ERP framework

SEBI (Credit Rating Agencies) Regulations, 1999, as amended in 2023 + SEBI circular on ESG Rating and ESG Rating Providers (2023)

Name both the regulations and the circular. The regulations give the legal power. The circular gives the operating detail.

Registration rule

No person may act as an ERP without a SEBI certificate of registration

The applicant must meet conditions on legal form, net worth, fit and proper status and governance. The framework set a minimum net worth of ₹5 crore at introduction; check the current text before quoting it.

Core ESG Rating

Core ESG Rating = rating built on BRSR Core disclosures, with assurance

This is the anchor product. It links the rating framework to the BRSR Core mandate for listed entities.

ERP disclosure norms

Methodology + data sources + limitations + conflict-of-interest management = public disclosure by the ERP

Say that the ERP must publish these and keep them current. Do not claim exact numeric thresholds you are not sure of.

Categories of ESG debt securities

Green debt securities | Social bonds | Sustainability bonds | Sustainability-linked bonds

Later amendments widened the list. For each, remember the disclosure duties: use of proceeds, project evaluation process, reviewer or certifier, and annual reporting.

Anti-greenwashing principle

Claim made at issue = disclosed objective + verifiable use of proceeds + continuing report

Use this as the conclusion line in case answers on ESG debt securities.

Legal source

Regulation 34(2)(f), SEBI LODR, 2015 → BRSR in the annual report of the top 1,000 listed entities by market capitalisation

Voluntary for FY 2021-22, when entities could still file the BRR. Mandatory from FY 2022-23. It replaced the BRR. Quote the regulation number in every answer.

Structure of BRSR

Section A (General) + Section B (Management and Process) + Section C (Principle-wise Performance, 9 NGRBC principles)

Under Section C, Essential Indicators are mandatory and Leadership Indicators are voluntary.

BRSR Core phasing (July 2023 circular)

Reasonable assurance: top 150 in FY 2023-24 → top 250 in FY 2024-25 → top 500 in FY 2025-26 → top 1,000 in FY 2026-27

Learn it as a ladder of 150, 250, 500, 1,000. SEBI has revised the framework since, including through a 2025 circular, so check the latest SEBI circular.

Nine BRSR Core attributes

GHG, water, energy, circularity, employee wellbeing and safety, gender diversity, inclusive development, fairness to customers and suppliers, openness of business

Remember the first three as footprints (GHG, water, energy). Circularity is the fourth environmental attribute. The last five are social and governance attributes.

Emission, water, energy and waste intensity

Intensity = total quantity ÷ (revenue from operations ÷ PPP conversion factor)

The factor is the World Bank PPP rate for India. Used for Scope 1 + Scope 2 GHG, water consumption, energy and waste. The PPP adjustment makes cross-company comparison fair.

Value chain coverage

Value chain disclosure applies to the top 250 listed entities from FY 2024-25 (July 2023 circular), covering their key upstream and downstream partners selected by a share of purchases and sales

Assurance of value chain data was voluntary at the start. SEBI later revised the framework, including by a 2025 circular. Quote the percentage thresholds only if you are sure of the current circular.

ISSB four pillars

Governance + Strategy + Risk management + Metrics and targets

Used in IFRS S1 and IFRS S2. Taken from TCFD. Name all four in any answer.

Financial materiality (ISSB)

Information that could reasonably affect investors' decisions about providing resources to the entity

Outside-in view: how sustainability issues affect the company.

Double materiality (CSRD)

Impact materiality + Financial materiality

Company reports both its impact on people and environment and how sustainability issues affect it.

IFRS S1 vs S2

S1 = general sustainability-related financial disclosures; S2 = climate-related disclosures

S2 is the climate-specific standard and applies S1's structure.

GRI vs ISSB

GRI = impact on world, multi-stakeholder; ISSB = effect on enterprise value, investor-focused

The most common comparison question.

EU Taxonomy alignment

Share of turnover, capex and opex from taxonomy-aligned activities

A classification and disclosure tool, not a ratings system.

CBAM

Carbon price obligation on imports of specified carbon-intensive goods into the EU

A trade measure, not a reporting standard. Indian exporters are exposed.

Quick revision

• A sustainability audit checks ESG data, processes and claims; assurance gives a stated level of confidence to users.
• Assurance and ratings are different: assurance verifies information, a rating gives an opinion or score on performance.
• ESG ratings from different providers can differ because their methods, weights and data sources differ.
• SEBI regulates ESG rating providers through its own framework; check the official text for registration and conduct requirements.
• BRSR is the structured sustainability disclosure format for listed entities in India.
• BRSR Core is a focused set of key indicators that is subject to assurance.
• Link BRSR to the principles of the National Guidelines on Responsible Business Conduct.
• Companies Act has provisions with ESG content, such as CSR and board reporting duties; state them only with confirmed details.
• Global standards exist for sustainability reporting; know the purpose and audience of each one you study.
• In every answer, give the provision, apply it to the facts and end with a clear conclusion.

Common mistakes

• Treating a sustainability audit as the same as a financial audit. Fix: Contrast the subject matter, criteria, evidence and assurance level. Say that criteria for ESG data are often less settled than accounting standards.
• Confusing limited and reasonable assurance, or writing the wrong conclusion wording. Fix: Limited means a negative-form conclusion. Reasonable means a positive-form conclusion. Link the level to the amount of work done.
• Treating ESG score and ESG rating as exactly the same thing. Fix: Say a score is the calculated number and a rating is the grade or category assigned. Add that practice varies by provider.
• Saying a higher number is always better. Fix: Remember that Sustainalytics measures unmanaged risk, so lower is better, while MSCI AAA is the best grade.
• Saying ESG ratings are regulated under the Companies Act, 2013. Fix: ERPs are regulated by SEBI under the amended Credit Rating Agencies Regulations, 1999. Companies Act provisions apply to the rated company, not to the ERP.
• Treating an ERP as the same thing as a credit rating agency. Fix: A credit rating agency rates credit risk. An ERP rates ESG performance. They need separate registration for their separate activities, even if one group houses both.
• Treating BRSR and BRSR Core as the same thing. Fix: State that BRSR is the full report on the nine NGRBC principles, while BRSR Core is a smaller KPI set under nine attributes that needs reasonable assurance.
• Saying all BRSR content must be assured. Fix: Only the BRSR Core KPIs require reasonable assurance. Other parts of the BRSR are not covered by the mandatory assurance.
• Treating TCFD as still the live standard-setter. Fix: Say that TCFD's four pillars were carried into IFRS S2 and the ISSB took over monitoring of climate disclosures.
• Saying the CSRD applies to all Indian companies. Fix: State that it applies to entities in the EU scope and, under the Directive's conditions, certain non-EU groups with significant EU activity. Indian companies are affected through EU subsidiaries, operations or customers, subject to current thresholds.

Exam tips

• Answer in the order of definition, objective, scope, process, level and conclusion. Examiners reward structure.
• In case questions, spot the facts that show missing evidence, weak controls or no independence, and link each to assurance.
• Always show the contrast with financial audit when the question uses the word difference.
• Name the standard exactly, such as ISAE 3000 (Revised), and say what it covers. Do not add section numbers or dates you are unsure of.
• Add a practical Company Secretary point, such as data controls, board reporting or choosing a competent assurer.
• Answer in the order: definition, build steps, providers, uses, limits, conclusion. It matches how marks are given.
• Use the scale direction correctly for each provider and name the provider whenever you quote a grade.
• Link the topic to BRSR and SEBI's regulation of rating providers to show current Indian knowledge.