SEBI Proposes New Framework for ESG Rating Transparency

The Securities and Exchange Board of India (SEBI) has proposed new guidelines for ESG Rating Providers (ERPs), particularly those utilizing a subscriber-pays model. This includes an exemption from mandatory disclosures to stock exchanges and ensures ERPs provide rating reports to both subscribers and issuers simultaneously, fostering transparency and regulatory alignment.

In a move aimed at enhancing clarity and transparency, India's markets regulator, the Securities and Exchange Board of India (SEBI), has proposed revisions to the framework governing ESG Rating Providers (ERPs), particularly for those operating on a subscriber-pays model.

The proposed changes include an exemption for ERPs from the requirement to disclose ESG ratings to stock exchanges. SEBI suggests that rating reports should be shared with both subscribers and the rated issuer at the same time, promoting transparency. Furthermore, SEBI mandates that ERPs ensure entities cannot subscribe to their own ratings.

The regulator is open to public comments on this consultation paper until November 15, as part of its effort to refine ESG ratings and strengthen regulatory alignment within its framework.