The Securities and Exchange Board of India (SEBI) announced that it has launched a new working group to review of the regulatory framework governing ESG Rating Providers.
The new review follows the release by SEBI in 2021 of its “Master Circular for ESG Rating Providers,” which effectively brought ESG ratings providers into the SEBI’s regulatory framework for credit ratings agencies. The regulator said that its decision to conduct the review follows feedback from market participants and stakeholders regarding the current framework.
SEBI’s review forms part of a series of moves by regulators in jurisdictions globally to institute and update regulatory frameworks for ESG ratings, including in Europe and the UK over the past year. In 2021, international securities regulator standards setter IOSCO called for regulators to focus on improving transparency in the ESG ratings and data space, and to begin to apply regulatory oversight. IOSCO also provided a series of recommendations for regulators, such as requiring providers to identify and disclose potential conflicts of interest, and to consider the data and methodologies used by the providers.
According to SEBI, its new working group includes representatives from issuers, investors and ESG rating users, as well as domestic and global ESG ratings providers, ESG analysts, legal experts and academia. The group is mandated to undertake a comprehensive review of the current framework governing ESG ratings providers, examine suggestions from market participants, and to recommend measures to enhance transparency, reliability and confidence in ESG ratings, as well as to evaluate international regulatory developments in the ESG ratings space and identify areas of alignment with global best practices.
