The Securities and Exchange Board of India, a market regulator, published a consultation document to make it easier for ERPs or ESG rating providers to conduct business.

To expand the scope of ERPs, the report suggested a number of regulation adjustments, such as rating unlisted securities and other goods or issuers. ERPs are currently limited to rating only organizations that are listed.

The goal of this modification is to promote more thorough evaluations of different issuers and expand the market for ESG ratings.

In order to avoid placing needless regulatory burdens on businesses outside of SEBI’s jurisdiction, entities not involved in SEBI-regulated operations would no longer be required to register with the market regulator.

Additionally, the regulator maintained that registered ERPs must disclose in their communications that they rate goods or issuers that are not under SEBI’s purview. They ought to make clear the regulatory character of these ratings by identifying the entity that conducts them.

The consultation also recommended that issuer reports be distributed to subscribers and issuing businesses at the same time.

This modification aims to improve openness and involvement by giving rated companies the chance to address or explain concerns brought up in the reports.

In order to ensure that more information is presented alongside the ratings and maybe enhance stakeholder comprehension, ERPs would be allowed to incorporate clarifications from rated businesses as an attachment to the rating report.

Additionally, subscriber-pays ERPs will no longer be required to notify stock exchanges of any revisions or ESG ratings.

In order to include ESG rating provisions into the current Credit Rating Agencies (CRA) laws, the study proposed an activity-based regulatory framework for ERPs. This strategy could accommodate the special features of ESG ratings while streamlining regulatory oversight.

SEBI’s dedication to improving the operational environment for ESG rating agencies in India by lowering compliance costs and broadening their range of operations is reflected in the consultation document.

As SEBI works to improve its strategy for creating an effective and transparent ESG rating environment, stakeholders are invited to offer input on these recommendations.

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