New Delhi : Market regulator SEBI has taken a big decision regarding ESG rating providers i.e. ERP. SEBI has put forward a proposal to make changes in the framework for these rating agencies. This is going to be done especially for those using the consumer payment model. This also includes exempting stock indexes from the requirement to disclose ESG ratings.
Securities and Exchange Board of India (SEBI) has further suggested that ERPs using subscriber-pay model should share ESG (Environment, Social and Governance) rating reports with both subscribers and rated insurers. This policy should be publicly disclosed.
enhancing regulatory alignment
SEBI has said in its consultation letter that ERPs should ensure that rated institutions, their group companies or associates are not able to subscribe to their own ESG ratings. These proposals are aimed at enhancing clarity, transparency and regulatory alignment of ESG ratings within the infrastructure of SEBI.
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Issued consultation letter
SEBI had introduced rules for ERP in July 2023, but ERP has sought clarification on some provisions. Especially for those using consumer payment models and accordingly the regulator issued a consultation letter on Thursday. In this, SEBI has proposed that ERPs should allow issuers to respond to ESG rating reports within a specified time-frame. Any comments from the issuer should be added to the report as an appendix. If the ERP disagrees with the issuer's view, it may respond via comment or addendum.
ESG rating disclosure
Furthermore, ERPs on subscriber-pay models should be exempted from disclosing ESG ratings to stock exchanges, provided they confirm that they have no non-public information that could influence the ratings.
Public comments till November 15
ERPs may rate unlisted issuers or other products under specific guidelines of the respective regulators. SEBI-registered ERPs must clear the regulatory body overseeing any non-SEBI regulated ratings. The regulator has sought public comments on the proposals till November 15.
(with agency input)
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