SEBI Proposes Changes to ESG Rating Framework, Seeks Public Feedback by 15 Nov

Markets regulator SEBI has proposed changes to the framework for ESG Rating Providers (ERPs), especially for those using a subscriber-pays model. Key suggestions include an exemption from the requirement to disclose ESG ratings to stock exchanges. SEBI recommends that ERPs using this model share ESG rating reports with subscribers and the rated issuer at the same time. Additionally, these policies should be publicly available. The regulator emphasized that rated entities or their associates should not be able to subscribe to their own ESG ratings. These changes aim to improve the clarity, transparency, and regulatory alignment of ESG ratings. SEBI had introduced regulations for ERPs in July 2023, but ERPs have requested clarification on some rules, prompting the regulator to release a consultation paper. The paper outlines that ERPs must allow issuers a set timeframe to respond to ESG rating reports. Issuer feedback should be included in the report as an addendum, with ERPs having the right to add remarks or another addendum if they disagree. ERPs following the subscriber-pays model would be exempt from disclosing ratings to stock exchanges if they confirm no non-public information impacts the rating. ERPs can rate unlisted entities or products under guidelines from relevant regulators. SEBI-registered ERPs must clarify which regulatory body oversees any non-SEBI ratings. SEBI is seeking public feedback on these proposals until November 15. (Source: PTI)