SEBI proposed new measures to strengthen the regulatory framework for ESG Rating Providers (ERPs).
The SEBI has proposed additional provisions to strengthen the framework for ESG rating providers (ERP).
The main aim of the new measures to strengthen the regulatory framework for ESG Rating Providers (ERPs) is to enhance transparency and accountability.
The proposal is focused on key areas such as the withdrawal of ESG ratings and disclosure of rating rationale.
Under the subscriber-pays model, SEBI has proposed that ERPs can withdraw a rating if there are no subscribers for the rating.
Under the issuer-paid model, ERPs will be able to withdraw ratings after rating a security for three consecutive years, or 50 per cent of the tenure of the security – whichever is higher – and receiving approval from 75 per cent of bondholders based on value.
Sebi has also proposed that ERPs following a subscriber-pays model should share detailed rating rationales and reports only with subscribers and not disclose them on their websites.
As per new measures, internal audits and composition of nomination and remuneration committee (NRC) for Category-II ERPs will be necessary two years after the issuance of the new rules.
ESG stands for environmental, social and governance.
