SEBI brings ESG rating providers under regulation from July 2023
SEBI notified the Credit Rating Agencies (Amendment) Regulations, 2023 on July 3, bringing ESG rating providers under regulatory oversight amid global moves by IOSCO, the EU, Japan and the UK. The framework establishes certification, governance and conflict-of-interest rules for ESG rating agencies operating in India.
On July 3, 2023, SEBI announced the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2023, introducing a new chapter on ESG Rating Providers within the 1999 Credit Rating Agencies Regulations. The move responds to a fragmented global market of roughly 150 ESG data providers and low inter-rater correlation, averaging 0.54 between agencies for the same company per Berg, Kolbel and Rigobon (2022). It parallels initiatives by IOSCO (2021), the European Commission, FSA Japan, the UK government and ICMA's July 5, 2023 voluntary code of conduct.
The regulations affect ESG rating providers operating in India, their promoters and the issuers and investors relying on their ratings. Providers must obtain a SEBI certificate, with existing providers given a six-month grace period, incorporate under the Companies Act 2013 with ESG rating as their main object, and maintain at least 26% promoter shareholding for five years. Promoters must be overseen by financial-sector regulators such as SEBI, RBI, IRDAI or PFRDA, or be a FATF-jurisdiction foreign provider with at least five years of ESG rating experience.
ESG rating providers should obtain SEBI certification within the six-month grace period, maintain a website disclosing ratings, environmental, social and governance scores, methodologies and category-wise factor weightings, and establish conflict-of-interest policies and a code of conduct. Providers are barred from offering ESG consulting or advisory services beyond rating activities. Issuers and investors in India should monitor how certified providers reshape the ratings market, while watching parallel EU, UK, Japanese and IOSCO frameworks shaping globally harmonised expectations for transparency and accountability.
Key figure — Minimum promoter shareholding: 26% for five years
This content is AI-assisted and reviewed by the ESG Broadcast editorial team. It is for informational purposes only and is not investment or ESG-rating advice. See our Technology & Transparency policy.
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