SEBI Circular No.: SEBI/HO/DDHS/DDHS-PoD-3/P/CIR/2025/007
SEBI Circular dated: January 17, 2025
Relevant Act/Regulations: Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999, SEBI Act 1992
Ref to : Master Circular for ESG Rating Providers (ERPs) SEBI/HO/DDHS/DDHS-POD3/P/CIR/2024/47 dated May 16, 2024
Backdrop & Legal provisions: ESG ratings refer to evaluations of a company’s performance based on its environmental, social, and governance practices. These ratings are provided by various agencies and firms, helping investors and stakeholders assess how well companies manage risks and opportunities related to sustainability and ethical practices.
Para 10.1 of the Master Circular for ESG Rating Providers (ERPs) SEBI/HO/DDHS/DDHS-POD3/P/CIR/2024/47 dated May 16, 2024 (“Master Circular”) provides the following in respect of material events requiring a review of the ESG ratings:
10.1.1. Regulation 28L(g) of CRA Regulations require an ERP to have efficient systems to track material developments related to environmental, social and governance factors to ensure timely and accurate ESG ratings.
10.1.2. Material developments in this respect shall be any event that results in a change of the ESG profile of the rated company. Such material developments shall include, but not be restricted to, publication of Business Responsibility and Sustainability Reporting (BRSR) or controversy/ penalty in environmental, social or governance areas.
10.1.3. ERPs shall carry out a review of the ESG ratings upon the occurrence of or announcement/ news of such material developments, and immediately, but not later than 10 days of occurrence of the said event.
ERPs made a representation to SEBI:
ERPs have submitted a representation to SEBI, outlining the operational challenges involved in reviewing ESG ratings for a large number of listed companies following the publication of their BRSR, within the prescribed 10-day timeline. In light of these challenges, and to promote Ease of Doing Business, SEBI has been decided to grant a relaxation in the timeline for the review of ESG ratings following the publication of the BRSR.
Relaxation in timeline for review of ESG rating & modification of Para 10.1.3. of the Master Circular:
Accordingly, Para 10.1.3. of the Master Circular stands modified as below:
“ERPs shall carry out a review of the ESG ratings upon the occurrence of or announcement/ news of such material developments immediately, but not later than 10 days of occurrence of the said event. However, review of the ESG rating pursuant to publication of BRSR by the rated entity shall be carried out immediately, but not later than 45 days of the publication of the BRSR.”
Applicability of the Circular:
The circular shall be applicable with immediate effect.
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