The Securities and Exchange Board of India (Sebi) on April 30, 2025 issued clarifications and procedural changes regarding withdrawal norms and disclosure guidelines for Environmental, Social, and Governance (ESG) ratings providers (ERPs).
Sebi has revised withdrawal norms and disclosure guidelines for ESG rating providers. For stock exchanges, Sebi has said they must clearly disclose the ESG rating of a listed company on their website, under a separate tab or section on that company’s page
The Securities and Exchange Board of India (Sebi) on April 30, 2025 issued clarifications and procedural changes regarding withdrawal norms and disclosure guidelines for Environmental, Social, and Governance (ESG) ratings providers (ERPs).
The regulator’s move comes after it received feedback from ERPs and various stakeholders. The circular is effective immediately, Sebi said.
1] For ERPs following a subscriber-pays model:
ERPs can withdraw ratings if there are no active subscribers or if the rated entity fails to file its Business Responsibility and Sustainability Report (BRSR).
“However, where the rated entity/instrument is part of a rating package (e.g. Nifty 50), which continues to have subscribers, such rating may not be withdrawn. Once withdrawn, the ERP shall ensure that such withdrawn rating is not made available to any subscriber in future,” Sebi said.
2] For ERPs following an issuer-pays business model:
ERPs can withdraw ratings after covering the issuer or instrument for at least three years or 50 per cent of the tenure of the security, whichever is higher. In case of debt securities, this will be applicable after getting consent from 75 per cent of bondholders.
ERPs following subscriber-pays model will now no longer be required to disclose the detailed ESG rating rationales on their websites. However, they are still required to share the rationales with their subscribers.
For stock exchanges, Sebi said they must clearly disclose the ESG rating of a listed company on their website, under a separate tab or section on that company’s page.
For ESG ratings of a debt security, it added, the stock exchange where it is listed is required to clearly display the rating on its website, under a separate tab or section on that security’s page.
The regulator has also relaxed a few internal audit norms for ERPs, especially for new players. According to the revised norms, category-II ERPs have been granted two years’ time to meet requirements, such as internal audit and the setting up of committees such as the Nomination and Remuneration Committee (NRC) and ESG Ratings Sub-Committee.
Sebi has expanded the pool of eligible professionals who can conduct these audits. Along with chartered accountants, cost accountants (ACMA/FCMA) and those with a Diploma in Information System Security Audit (DISSA) from ICMAI are now also allowed to be part of the audit team.