Sebi's New ESG Rating Rules: Clarity and Transparency Boost

India's markets regulator, Sebi, has revised the framework for ESG Rating Providers (ERPs), mandating increased transparency, especially for those using a subscriber-pays model. These rules require simultaneous sharing of ESG reports with both subscribers and the rated issuer. This aims to ensure clarity and mitigate potential conflicts of interest.

The Securities and Exchange Board of India (Sebi) has introduced significant changes in the regulatory framework concerning ESG Rating Providers, specifically targeting those operating under a subscriber-pays model. This move is aimed at enhancing transparency and stakeholder trust.

Under this new policy, ESG Rating Providers are obligated to share their rating reports with both subscribers and the rated entity or issuer at the same time, ensuring that all parties have access to the same information. This approach is intended to enhance fairness and provide an opportunity for comprehensive feedback within two working days.

Furthermore, Sebi has mandated the disclosure of related policies on ERPs' websites and provided guidelines to prevent conflict of interest. By mandating these changes, Sebi hopes to cement the reliability and integrity of ESG ratings in the financial sector.

(With inputs from agencies.)