Government notifies SEBI regulation amendment for ESG rating providers

Government notifies SEBI regulation amendment for ESG rating providers

The market regulator had initiated a consultation paper in February

The Government of India has notified the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2023, making rules and regulations for ESG Ratings Providers (ERPs).

The amendment added a subchapter to the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999, laying the groundwork for rating agencies to become an ERP.

It sets guidelines and rules on the registration of ERPs including eligibility criteria, code of conduct, transparency, governance, prevention of conflict of interest, rating process, monitoring, review of ratings, disclosure required, and applicability.

The move followed amid the growing recognition of the significant economic and financial impact of climate change and Environmental, Social and Corporate Governance (ESG) risks.

The Securities and Exchange Board of India (SEBI) has mandated the top 1,000 listed companies by market capitalization to make filings as per the Business Responsibility and Sustainability Reporting (BRSR) from Financial Year 2023.

In its consultation paper, SEBI stated, "With the BRSR becoming mandatory from this financial year and a number of stakeholders such as investors and ESG rating providers placing reliance on disclosures made in the BRSR, assurance becomes key for enhancing the credibility of disclosure and investor confidence."