Regulation 72
Environmental, Social and Governance (ESG)
IFSCA (Fund Management) Regulations, 2025Amended in 2026Chapter V · Environmental, Social and Governance (ESG)
Chapter V · Environmental, Social and Governance (ESG)
Regulation 72 –
Amended 2026 High importance about 3 min
ESG requirements: When ESG governance and disclosure obligations apply to an FME.
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In plain English
FMEs managing AUM above USD 3 billion (or another specified threshold) must establish ESG governance policy and related obligations; as amended, fund-of-funds AUM is excluded when testing this threshold.
In plain English
AUM > USD 3 billion at FY close (excluding FoF AUM)
ESG governance threshold
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The rule, in its own words
Read the exact text of Regulation 72
72. (1) A FME managing AUM above USD 3 billion 42[, excluding the AUM of fund of funds schemes,] as at the close of a financial year or any other threshold of AUM as may be specified by the Authority, shall: (a) establish policy on governance around material sustainability-related risks and opportunities; (b) disclose in its annual report how the FME identifies, assesses and manages material sustainability-related risks; (c) establish and disclose in its annual report the process of factoring sustainability related risks and opportunities into fund manager’s investment strategies and processes, including, where relevant, data and methodologies used; and (d) comply with any other sustainabili…
Show the full text
72. (1) A FME managing AUM above USD 3 billion 42[, excluding the AUM of fund of funds schemes,] as at the close of a financial year or any other threshold of AUM as may be specified by the Authority, shall: (a) establish policy on governance around material sustainability-related risks and opportunities; (b) disclose in its annual report how the FME identifies, assesses and manages material sustainability-related risks; (c) establish and disclose in its annual report the process of factoring sustainability related risks and opportunities into fund manager’s investment strategies and processes, including, where relevant, data and methodologies used; and (d) comply with any other sustainability related requirements as may be specified by the Authority. (2) A FME that launches a scheme related to ESG, shall make full disclosure regarding investment objective, investment policy, strategy, material risk, benchmark, etc., in the manner as may be specified by the Authority. (3) All scheme documents filed by FME with the Authority under Chapter III shall disclose whether sustainability related risks are incorporated in the decision making along with the details of the same: Provided that in case where the sustainability related risks are not incorporated in the decision making, a negative statement shall be included. CHAPTER VI OTHER FUND MANAGEMENT ACTIVITIES PART A: PORTFOLIO MANAGEMENT SERVICES
Statutory text — Principal Regulations, 2025, consolidated as amended up to 10 September 2026 (including the Second Amendment, 2026). The notified Gazette text prevails. Tap a highlighted word for how it functions.
Amendment history (1 note)
Footnotes from the consolidated text. They record earlier wording and are not operative law.
- 42 Inserted by the International Financial Services Centres Authority (Fund Management) (Second Amendment) Regulations, 2026, w.e.f. September 10, 2026.
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Exceptions and conditions
Taken from the wording of this provision — the carve-outs and conditions worth reading closely.
(3) All scheme documents filed by FME with the Authority under Chapter III shall disclose whether sustainability related risks are incorporated in the decision making along with the details of the same: Provided that in case where the sustainability related risks are not incorporated in the decision making, a negative statement shall be included
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What this means in practice
Practical effect
ESG obligations now bite on a cleaner AUM base (excluding fund-of-funds), so recompute before assuming you are in or out.Compliance actions
- Applies to
- FME managing AUM above USD 3 billion (excluding FoF AUM)
- Frequency
- At each FY close, and ongoing if triggered
- Trigger
- AUM above USD 3 billion at FY close (ex-FoF)
- Evidence
- AUM computation workpaper (ex-FoF); ESG governance policy document
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What changed in 2026
The USD 3 billion AUM threshold that triggers ESG-related obligations under Reg 72(1) now expressly excludes the AUM of fund-of-funds schemes.
Practical effect
Fund-of-funds AUM no longer counts toward the USD 3 billion ESG-obligation trigger — may take some FMEs below the threshold.What to do
Recompute AUM for Reg 72 threshold purposes excluding fund-of-funds AUM; reassess ESG policy/reporting obligations.6
The numbers that matter
| Requirement | Threshold | On crossing |
|---|---|---|
| ESG governance threshold | AUM > USD 3 billion at FY close (excluding FoF AUM) | Establish ESG governance policy and annual-report disclosures |
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Check yourself
Quiz Centre
Test yourself on Regulation 72
17 questions in the unified bank test this regulation. Each explains every option and cites the provision.
The ESG governance obligations bite above USD 3 billion AUM. What did the Second Amendment change about this test?
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Your notes
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ESG requirements