The Securities and Exchange Board of India has issued a circular providing clarification and procedural changes to aid and strengthen ESG Rating Providers (“ERP”).
Key Highlights
- ERP following a Subscriber-Pays business model may withdraw their rating if there are no subscribers for the rating as on the date of withdrawal. However, where the rated entity/ instrument is part of a rating package (e.g., Nifty 50), which continues to have subscribers, such rating may not be withdrawn.
- ERP following an Issuer-Pays business mode may withdraw their rating subject to the ERP having rated the security continuously for 3 years or 50 % of the tenure of the security, whichever is higher, and having received NOC from 75% of the bondholders by value.
- ERP following a Subscriber-Pays business model now may share the detailed Rating Rationales/ Rating Reports, as specified in Para 11.3 of the Master Circular, only with their subscribers and may not disclose the same on their websites.
- To provide all ERP with a larger pool of eligible professionals with the relevant experience/ qualifications for conducting the internal audit, it has been decided to include Cost Accountant (ACMA/ FCMA) and Diploma in Information System Security Audit (DISSA) qualifications from the Institute of Cost Accounts of India (ICMAI) to the audit team.
- The requirement for constitution of an ESG Ratings Sub-Committee and Nomination and Renumeration Committee (“NRC”) shall become effective for Category-II ERP only after a period of two years from the date of issuance of this Circular. Until the said time, the relevant issues under the purview of NRC and ESG Ratings Sub-Committee may be handled by the Board of the Category II ERP.
Refer to the circular hyperlinked below for ease of reference.
Source: SEBI
