SEBI considers ease of doing business measures for ESG rating providers

New Delhi: Markets regulator Sebi has proposed changes to the framework, including exempting stock exchanges from the requirement to disclose ESG ratings for ESG rating providers (ERPs), especially those using the subscriber-pay model. Additionally, the regulator has suggested that ERPs using a subscriber-pay model should share ESG (environmental, social and governance) rating reports with both subscribers and rated issuers simultaneously. This policy should be made public.

ERPs should ensure that rated entities, their group companies or associates cannot subscribe to their own ESG ratings, Sebi said in its consultation paper.

The proposals aim to enhance clarity, transparency and regulatory alignment of ESG ratings within the SEBI framework.

The Securities and Exchange Board of India (Sebi) had introduced rules for ERPs in July 2023, but ERPs have sought clarification on certain provisions, particularly for those using the subscriber-pay model, and the regulator released a consultation paper on Thursday accordingly. was

In the paper, the regulator proposed that ERP should allow issuers to respond to ESG rating reports within a defined timeline. Any comments from the issuer should be added to the report as an appendix.

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If the ERP disagrees with the issuer’s perspective, it may respond through a comment or addendum. In addition, ERPs on the subscriber-pay model should be exempted from disclosing ESG ratings to stock exchanges, if they confirm that they have no non-public information affecting the rating.

ERPs may rate unlisted issuers or other products under specific guidelines of relevant regulators. A SEBI-registered ERP should disclose to the regulatory body overseeing any non-SEBI regulated ratings. The regulator has sought public comments on the proposals till November 15.

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