MASTER CIRCULAR FOR ESG RATING PROVIDERS
SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/100 July 11, 2025
To,
All Registered ESG Rating Providers,
All Listed Entities,
All Recognized Stock Exchanges,
All Registered Depositories
Madam / Sir,
Subject: Master Circular for ESG Rating Providers (“ERPs”)
I. ESG Rating Providers are regulated under the provisions of Securities and
Exchange Board of India (Credit Rating Agencies) Regulations, 1999 (“CRA
Regulations” as amended with effect from July 4, 2023) that inter-alia prescribe
guidelines for registration of ERPs, general obligations of ERPs, manner of
inspection and code of conduct applicable to ERPs.
II. While the broad framework for ERPs has been laid down in the CRA Regulations,
the procedural/ disclosure requirements and obligations are being specified
through this Master Circular, which will enable the industry and other users to have
access to all the applicable directions to ERPs at one place.
III. ERPs are directed to comply with the conditions laid down in this master circular.
Also, ERPs shall have necessary systems and infrastructure in place for
implementation of this circular. The Board of Directors of the ERP shall be
responsible for ensuring compliance with these provisions.
IV. This Master Circular is a compilation of the existing circulars as on date, with
consequent changes. Accordingly, the list of existing circulars for ERPs which have
been superseded by this Master Circular is placed at Appendix.
V. Notwithstanding such rescission-
a. anything done or any action taken or purported to have been done or taken
under the rescinded circulars, prior to such rescission, shall be deemed to
have been done or taken under the corresponding provisions of this Master
Circular;
b. any application made to the Board under the rescinded circulars, prior to such
rescission, and pending before it shall be deemed to have been made under
the corresponding provisions of this Master Circular;
c. the previous operation of the rescinded circulars or anything duly done or
suffered thereunder, any right, privilege, obligation or liability acquired,
accrued or incurred under the rescinded circulars, any penalty, incurred in
respect of any violation committed against the rescinded circulars, or
any investigation, legal proceeding or remedy in respect of any such
right, privilege, obligation, liability, penalty as aforesaid, shall remain
unaffected as if the rescinded circulars have never been rescinded.
VI. This circular is issued in exercise of the powers conferred by Section 11 (1) of
Securities and Exchange Board of India Act, 1992 read with the provisions of
Regulation 28H of CRA Regulations, to protect the interest of investors in
securities, to promote the development of, and to regulate, the securities market.
VII. Applicability: The provisions of the Master Circular shall come into force with
immediate effect from the date of notification of this Master Circular. For the
purpose of this Circular, “listed entity” shall have the same meaning as provided in
Regulation 2(1)(p) of Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations, 2015.
VIII. Monitoring: Monitoring of provisions of this circular shall be done in terms of the
yearly internal audit for ERPs, mandated under Regulation 28S of the CRA
Regulations and this master circular issued thereunder.
IX. This Circular is being issued with the approval of Competent Authority.
X. This Circular is available on SEBI website at www.sebi.gov.in under “Legal
Framework”.
Yours faithfully,
Ritesh Nandwani
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No.022-2644-9696
Email ID - riteshn@sebi.gov.in
Table of Contents
Chapter I : Registration, Approval and Surrender Requirements .................................... 6
Registration Mechanism for ESG Rating Providers .............................................................................. 6
Grant of Prior approval for change in control of ERPs ......................................................................... 7
Transfer of business by SEBI registered intermediaries to other legal entity ...................................... 9
Guidelines on Suspension, Cancellation or Surrender of Certificate of Registration: ....................... 10
Chapter II : Rating Operations ........................................................................................... 14
Type of ESG Ratings / Scores .............................................................................................................. 14
Rating Scale ........................................................................................................................................ 17
Other Activities by ESG Rating Providers ........................................................................................... 17
Business Model .................................................................................................................................. 18
Rating Process .................................................................................................................................... 19
Monitoring and Review of Ratings ................................................................................................... 21
Rating Rationale ............................................................................................................................... 21
Provisions applicable to ERPs following an issuer-pays business model ......................................... 23
Withdrawal of ratings ...................................................................................................................... 26
Request by Issuers for review/appeal of ratings provided by ERPs ................................................. 28
Governance Norms of ERPs.............................................................................................................. 28
Accountability of Rating Analysts of ERPs ........................................................................................ 29
Dealing with Conflict of interest ...................................................................................................... 29
Guidelines on listed securities/instruments/products falling under the purview of other financial
sector regulator/s or authority/ies’ ....................................................................................................... 31
Chapter III : Reporting and Disclosures ........................................................................... 33
Periodic Disclosures ......................................................................................................................... 33
Continuous Disclosures .................................................................................................................... 35
Guidelines on manner of disclosures by ERPs on its website: ......................................................... 37
Chapter IV : Internal Audit for ERPs ................................................................................. 39
Internal Audit for ERPs: .................................................................................................................... 39
Requirements related to Internal Audit of ERPs: ............................................................................. 39
Chapter V : Miscellaneous ................................................................................................. 42
Designated e-mail ID for regulatory communication with SEBI: ...................................................... 42
Information regarding Grievance Redressal Mechanism: ............................................................... 42
Guidelines on Outsourcing of Activities by ERPs ............................................................................. 43
Page 4 of 68
General Guidelines for dealing with Conflicts of Interest of ERPs and their Associated Persons in
Securities Market: .................................................................................................................................. 43
Standardization of Industry classification - Applicability to ERPs .................................................... 45
Firewall between ERPs and their Affiliates: ..................................................................................... 46
Annexures ........................................................................................................................... 47
Appendix: List of circulars superseded by Master Circular ........................................... 68
Page 5 of 68
Chapter I : Registration, Approval and Surrender Requirements
Registration Mechanism for ESG Rating Providers
1.1. SEBI has operationalized SEBI Intermediary Portal (https://siportal.sebi.gov.in) for
the intermediaries to submit all the registration applications online. The SEBI
Intermediary Portal shall include online application for registration, processing of
application, grant of final registration, application for surrender / cancellation,
submission of periodical reports, requests for change of name/ address/ other
details, etc., Link for SEBI Intermediary Portal is also available on SEBI website –
www.sebi.gov.in.
1.2. All applications for registration/ surrender/other requests will be made through
SEBI Intermediary Portal. The applicants will be separately required to submit
relevant documents viz. declarations/ undertakings required as a part of application
forms prescribed in relevant regulations, in physical form, for records without
impacting the online processing of applications for registration. In case of any
queries and clarifications with regard to the SEBI Intermediary Portal,
intermediaries may contact on 022-26449364 or may write at
portalhelp@sebi.gov.in.
1.3. However, till operationalisation of SEBI Intermediary Portal for ERPs, an entity
desirous of registering with SEBI as an ESG rating provider may file an application
with SEBI, as per the format prescribed in CRA Regulations, along with the
application fees and relevant documents, in hard copy, addressed to "Chief
General Manager, Department of Debt and Hybrid Securities, SEBI", as well as in
soft copy, via email to erp@sebi.gov.in. The same process shall also apply for
submission of periodical reports, requests for change of name / address / other
details, etc.
1.4. Fees and other charges payable to SEBI are subject to Goods and Services Tax
(GST) that is at present 18%.
Page 6 of 68
Grant of Prior approval for change in control of ERPs
2.1. As per Regulation 28H(c) of CRA Regulations, all registered ERPs are required to
obtain prior approval of SEBI in case of change in control.
2.2. To streamline the process of providing approval to the proposed change in control
of an ERP (hereinafter referred to as intermediary or applicant), the following is
mandated:
2.2.1. An ERP shall make an application to SEBI for prior approval through the
SEBI Intermediary Portal (https://siportal.sebi.gov.in). However, till
operationalisation of SEBI Intermediary Portal for ERPs, an ERP may submit
such application, in hard copy, addressed to "Chief General Manager,
Department of Debt and Hybrid Securities, SEBI", as well as in soft copy, via
email to erp@sebi.gov.in.
2.2.2. The abovementioned application by an ERP shall be accompanied by the
following information/ declaration/ undertaking about itself, the acquirer(s) /
the person(s) who shall have the control and the directors/ partners of the
acquirer(s) / the person(s) who shall have the control:
2.2.2.1. Current and proposed shareholding pattern of the applicant
2.2.2.2. Whether any application was made in the past to SEBI seeking
registration in any capacity but it was not granted? If yes, details thereof.
2.2.2.3. Whether any action has been initiated / taken under the Securities
Contracts (Regulation) Act, 1956 (SCRA) / Securities and Exchange
Board of India Act, 1992 (SEBI Act) or rules and regulations made
thereunder? If yes, status thereof along with the corrective action taken
to avoid such violations in the future. The acquirer/ the person who shall
have the control shall also confirm that it shall honour all past liabilities /
obligations of the applicant, if any.
2.2.2.4. Whether any investor complaint is pending? If yes, steps taken and
confirmation that the acquirer/ the person who shall have the control
shall resolve the same.
Page 7 of 68
2.2.2.5. Details of litigation, if any.
2.2.2.6. Confirmation that all the fees due to SEBI have been paid.
2.2.2.7. Declaration cum undertaking of the applicant and the acquirer / the
person who shall have the control (in a format enclosed at Annexure
1), duly stamped and signed by their authorized signatories that:
a. That there will not be any change in the Board of Directors of
incumbent, till the time prior approval is granted;
b. Pursuant to the grant of prior approval by SEBI, the incumbent shall
inform all its existing investors / clients about the proposed change
prior to effecting the same, in order to enable them to take informed
decision regarding their continuance or otherwise with the new
management; and
c. The ‘fit and proper person’ criteria as specified in Schedule II of SEBI
(Intermediaries) Regulations, 2008 are complied with.
2.2.3. The prior approval granted by SEBI shall be valid for a period of six months
from the date of such approval within which the applicant shall file application
for fresh registration pursuant to change in control.
2.2.4. If the ERP has rated any product or issuer, which falls within the ambit of
another regulator or authority, as specified at Para 5.5, then such ERP shall
obtain approval/ NOC from such regulator or authority and submit a self-
attested copy of the same to SEBI along with the request for change in
control. If the ERP has not handled any such product or issuer, it shall
provide a confirmation to that effect.
2.3. To streamline the process of providing approval to the proposed change in control
of an intermediary in matters which involve scheme(s) of arrangement which needs
sanction of the National Company Law Tribunal (“NCLT”) in terms of the provisions
of the Companies Act, 2013, the following shall be applicable:
2.3.1. The application seeking approval for the proposed change in control of the
intermediary shall be filed with SEBI prior to filing the application with NCLT.
Page 8 of 68
2.3.2. Upon being satisfied with compliance of the applicable regulatory
requirements, an in-principle approval will be granted by SEBI;
2.3.3. The validity of such in-principle approval shall be three months from the
date issuance, within which the relevant application shall be made to NCLT.
2.3.4. Within 15 days from the date of order of NCLT, the intermediary shall
submit an online application in terms of paragraph 2.2 of this circular along
with the following documents to SEBI for final approval:
2.3.4.1. Copy of the NCLT Order approving the scheme;
2.3.4.2. Copy of the approved scheme;
2.3.4.3. Statement explaining modifications, if any, in the approved scheme vis-
à-vis the draft scheme and the reasons for the same; and
2.3.4.4. Details of compliance with the conditions/ observations, if any,
mentioned in the in-principle approval provided by SEBI.
Transfer of business by SEBI registered intermediaries to other legal entity
3.1. SEBI has been receiving registration applications pursuant to transfer of business
(SEBI regulated business activity) from one legal entity which is a SEBI registered
Intermediary (transferor) to other legal entity (transferee). In this regard, following
is clarified:
3.1.1. The transferee shall obtain fresh registration from SEBI in the same
capacity before the transfer of business if it is not registered with SEBI in the
same capacity. SEBI shall issue new registration number to transferee
different from transferor’s registration number in case business is transferred
through regulatory process (pursuant to merger / amalgamation / corporate
restructuring by way of order of primary regulator /government / NCLT, etc.)
or non-regulatory process (as per private agreement /MOU pursuant to
commercial dealing / private arrangement) irrespective of transferor
continues to exist or ceases to exist after the said transfer.
3.1.2. In case of change in control pursuant to both regulatory process and non-
regulatory process, prior approval and fresh registration shall be obtained.
While granting fresh registration to same legal entity pursuant to change in
control, same registration number shall be retained.
Page 9 of 68
3.1.3. If the transferor ceases to exist, its certificate of registration shall be
surrendered.
3.1.4. In case of complete transfer of business by transferor, it shall surrender its
certificate of registration.
3.1.5. In case of partial transfer of business by transferor, it can continue to hold
certificate of registration.
Guidelines on Suspension, Cancellation or Surrender of Certificate of Registration:
4.1. In order to facilitate orderly migration of ESG ratings pursuant to cancellation,
suspension, or surrender of certificate of registration of an ERP to another SEBI-
registered ERP, the following are hereby prescribed, subject to the requirements
of corresponding cancellation or suspension order(s) passed by SEBI (“the Order”),
if any:
4.1.1. On and from the date of the Order, or the date of submission of request for
surrender of certificate of registration (“the Request”) to SEBI, as applicable,
the concerned ERP shall –
4.1.1.1. disclose prominently on its website, the Order or the Request, as the
case may be, and communicate the same to its clients within 15 days of
the Order or the Request;
4.1.1.2. not take any new clients or fresh mandates;
4.1.1.3. allow its clients to withdraw any assignment given to the ERP, without
any additional cost to such clients;
4.1.1.4. facilitate an orderly migration of assignments as desired by clients to
other ERP(s) holding a certificate of registration under CRA
Regulations;
4.1.1.5. continue to comply with the provisions of the CRA Regulations and
circulars issued thereunder, till the time the ERP holds the certificate of
registration;
4.1.1.6. continue to co-operate with SEBI with regard to sharing of information
when requested and payment of fees as required under CRA
Regulations;
4.1.1.7. take such other action including providing any records or documents
Page 10 of 68
within the time period and in the manner, as may be required under the
CRA Regulations or as may be directed by SEBI.
4.1.2. The ERP, on and from the date of acceptance of the Request, or when it is
commencing the winding up process, shall:
4.1.2.1. return the certificate of registration so cancelled to SEBI;
4.1.2.2. not represent itself to be a holder of certificate for carrying out the activity
for which such certificate had been granted;
4.1.2.3. suspend undertaking activity for which such certificate had been
granted;
4.1.2.4. until it is wound up, continue to co-operate with SEBI on matters
pertaining to the activities of the ERP undertaken by it till it held the
certificate of registration under CRA Regulations;
4.1.2.5. make provisions as regards liability incurred or assumed by it;
4.1.2.6. until it is wound up, take such other action including providing any
records or documents within the time period and in the manner, as may
be required under the CRA Regulations or as may be directed by SEBI
4.1.3. Additionally, in case of suspension of the certificate of registration, the ERP,
during such period of suspension, shall –
4.1.3.1. suspend undertaking activity for which such certificate of registration
had been granted;
4.1.3.2. continue to co-operate with SEBI on matters pertaining to the activities
of the ERP undertaken by it under CRA Regulations;
4.1.3.3. make provisions as regards liability incurred or assumed by it;
4.1.3.4. take such other action including providing any records or documents
within the time period and in the manner, as may be required under the
CRA Regulations or as may be directed by SEBI.
4.1.4. In case of cancellation of certificate of registration, the ESG ratings
assigned by the ERP shall be valid till such time the client withdraws the
assignment and/or migrates the assignment to another ERP as specified or
the ERP is wound-up, whichever is earlier.
Page 11 of 68
4.1.5. Surrender of Certificate of Registration
4.1.5.1. If an ERP wishes to surrender the registration voluntarily, it shall
transfer, wherever relevant, its existing business/ client accounts to
another SEBI registered intermediary, before it makes a request to SEBI
for accepting the surrender of the certificate of registration.
4.1.5.2. If, at the time of request for surrender of certificate, the ERP has any
outstanding rating of any product or issuer, which falls within the ambit
of another regulator or authority, as specified at Para 5.5, then such ERP
shall obtain approval/ NOC from such regulator or authority and submit
a self-attested copy of the same to SEBI along with the request for
surrender of certificate. If the ERP does not have any outstanding rating
of any such product or issuer, it shall provide a confirmation to that
effect.
4.1.5.3. The ERP may, if it so desires, make a representation for dispensing with
the procedure, along with the application, for surrender in terms of the
first proviso to Regulation 33B of Securities and Exchange Board of
India (Intermediaries) Regulations, 2008 in the prescribed format placed
as Annexure 2.
4.1.5.4. In all cases of transfer of business or client accounts to another
registered intermediary, the clients shall not be subjected to any
additional cost.
4.1.5.5. ERP shall maintain its records, documents, information obtained from
its clients during the course of ESG rating from its clients, for at least
three years after surrender of registration.
4.1.5.6. In its application to SEBI, the ERP shall also provide an undertaking that
it shall continue to maintain confidentiality of the data obtained by it from
its existing clients for the purpose of ESG rating, unless asked to share
such information by operation of law.
4.1.6. In case of surrender of certificate of registration, the ESG ratings assigned
by the ERP whose certificate of registration is being surrendered, shall be
valid till such time the client withdraws the assignment and/or migrates to
Page 12 of 68
another ERP, or the date of acceptance of surrender by SEBI, whichever is
earlier.
4.1.7. In case of suspension of certificate of registration, the ESG ratings
assigned by the ERP, whose certificate of registration is suspended, shall
not be valid during the period of suspension.
4.1.8. Upon cancellation or surrender or suspension of certificate of registration
of an ERP, the concerned ERP’s services cannot be used by listed entities
or issuers for compliance with requirements of various SEBI regulations
which require ESG ratings from an ERP registered with SEBI.
4.1.9. Listed entities or issuers who have obtained ESG rating from an ERP
whose registration is cancelled or suspended or surrendered, desirous of
obtaining ESG rating for regulatory purposes, shall obtain ESG rating(s) from
other SEBI-registered ERP(s) holding a valid certificate of registration under
CRA Regulations.
Page 13 of 68
Chapter II : Rating Operations
Type of ESG Ratings / Scores
5.1. CRA Regulations define “environmental, social, and governance ratings”, or “ESG
ratings” as the rating products that are marketed as opinions about an issuer or a
security, regarding its ESG profile or characteristics or exposure to ESG risk,
governance risk, social risk, climatic or environmental risks, or impact on society,
climate and the environment, that are issued using a defined ranking system of
rating categories, whether or not these are explicitly labelled as “ESG ratings”. In
this regard, ESG rating or score have been treated interchangeably in this circular.
Any reference to ratings in this circular shall refer to ESG ratings, unless stated
otherwise.
5.2. An ERP shall offer at least the following ESG rating products:
5.2.1. ESG Rating
5.2.2. Transition or Parivartan Score
5.2.3. Combined Score
5.2.4. Core ESG Rating
5.2.5. Core Transition or Parivartan Score
5.2.6. Core Combined Score
5.3. An ERP may provide additional ESG rating products subject to compliance with
relevant provisions of the CRA regulations and circulars issued thereunder.
5.4. Further, the following is clarified:
5.4.1. If in any of the ESG rating products referred to at Para 5.2.1-5.2.3, the ERP
relies only on third-party assured parameters, then the ERP shall not be
required to provide separate ESG rating products referred to at Para 5.2.4-
5.2.6, respectively, or a non-core variant thereof.
For instance, if an ERP’s transition scoring is based only on third-party
assured data, the ERP shall not be required to provide a separate product
Page 14 of 68
called “Core Transition Score” or another separate product for transition
score based on non-assured data.
5.4.2. If an ERP incorporates transition assessment in its ESG ratings or Core
ESG ratings, then the ERP shall not be required to separately offer
Combined Score or a Core Combined Score (Para 5.2.3 and Para 5.2.6
above) respectively.
5.4.3. However, in the above cases, such ERP must disclose the said facts in
ESG rating rationales and ESG rating methodologies.
5.5. The above six ESG rating products shall:
5.5.1. suitably incorporate the environmental, social and governance aspects that
are contextual to the Indian market. An indicative list of India-specific ESG
parameters is placed at Annexure 3.
5.5.2. be assigned such that they allow comparison with companies in other
sectors, i.e., such rating products must contain sector-agnostic ESG ratings.
5.5.3. adhere to guidelines specific to the rating product as detailed below in this
circular.
5.6. Transition or Parivaratan Score
5.6.1. It is observed that various Indian companies may be rated on their current
emission levels as they begin to align their strategies with India’s
commitment of emissions intensity reduction to Net Zero by 2070, despite
substantial reduction year on year.
5.6.2. Evaluating Indian corporates on an absolute yardstick without recognizing
the efforts they make, and results they achieve, in transition may not lead to
the appropriate incentives for transition finance.
5.6.3. Hence, ESG rating providers shall provide two additional ratings:
5.6.3.1. ESG Transition or Parivartan score: measuring the velocity of and
investments in making the transition to Net Zero Goals/improving ESG
risk management. In other terms, the transition or Parivartan score
would reflect the incremental changes that the company has made in its
Page 15 of 68
transition story over recent years or concrete plans/targets to address
the risk and opportunities involved in transitioning to more sustainable
operations, rather than scoring them only on their current profile. This
transition score could track changes in quantitative metrics in trend-lines
or change in revenues from environmental/social services and products
or any quantitative assessments, as per the model of the ERP.
5.6.3.2. Combined Score: incorporating ESG rating and transition rating, i.e.,
measuring both the status and the ability to transition shall also be
provided. A combined score shall be determined in the following
manner:
ESG Score + Transition or Parivartan Score = Combined Score
Note: The “+” symbol does not denote a simple addition of the two
scores. An ERP shall be free to combine the two scores in a way that is
consistent with its publicly-disclosed rating methodology.
5.7. Core ESG Rating
5.7.1. ERPs shall provide a rating called the “Core ESG Rating” that shall be
based on third-party assured or audited data disclosed by the Company.
5.7.2. Further, core ESG rating rationales may contain an additional commentary
/ observations on data that may not be verified/ assured by a third-party. The
same ensures that unverified data is not included in core ESG rating, but at
the same time, users of core ESG rating are made aware of the unverified
information as well, based on which they may take any action as they deem
appropriate.
5.7.3. Further, a Core Combined score incorporating Core ESG rating and Core
transition rating, i.e., measuring both the status and the ability to transition
shall also be provided. A Core Combined score shall be determined in the
following manner:
Core ESG Score + Core Transition or Parivartan Score = Core Combined
Score
Page 16 of 68
Note: The “+” symbol does not denote a simple addition of the two scores.
An ERP shall be free to combine the two scores in a way that is consistent
with its publicly-disclosed rating methodology.
5.7.4. Core ESG rating, Core Transition or Parivartan Score, and Core Combined
Score shall be offered by an ERP pursuant to availability of ‘Business
Responsibility and Sustainability Report (BRSR) Core’ for the rated entity.
Rating Scale
6.1. In the interest of clarity to market participants, it is mandated that ESG ratings shall
be provided on a scale of 0 – 100, where 100 represents the maximum score.
6.2. For existing outstanding ESG ratings, the ERPs shall disclose new rating symbols
and definitions on their websites and update their rating lists on their websites;
6.3. For various ESG rating products (ESG rating, core ESG rating, transition or
Parivartan score, other ESG rating products), ERPs shall ensure use of suitable
nomenclature (use of prefixes or suffixes, etc.) that enables the end user(s) to
differentiate ESG rating products from each other.
Other Activities by ESG Rating Providers
7.1. CRA Regulations allow ERPs to undertake or offer ESG rating of any product or
issuer, as may be required by another financial sector regulator or authority, as
may be specified by SEBI, under the guidelines of such regulator or authority. In
this regard, the following is being specified:
7.1.1. A list of financial sector regulators/ authorities has been specified at
Annexure 4.
7.1.2. [The ESG ratings undertaken by an ERP under the guidelines of the
International Financial Services Centres Authority (IFSCA) shall be under the
purview of IFSCA. Accordingly:
Page 17 of 68
i. Any issue arising from the activities of such SEBI registered ERPs in
the International Financial Services Centre (IFSC) shall be dealt with
by IFSCA under the powers exercisable under Section 12 and 13 of
IFSCA Act and regulations and subsidiary instructions made
thereunder.
ii. IFSCA shall be responsible for dealing with complaints, enforcement
actions and furnishing information to third parties, including statutory
or judicial bodies, in respect to the services provided by the ERPs in
the IFSC.]1
7.1.3. ERPs may also undertake research activities, incidental to ESG rating,
such as research for economy, environment and ecology, society and social
issues, industries and companies.
7.2. Client-group level segregation for ESG ratings and/or green debt certifications –
7.2.1. For the purpose of this provision, client group shall include the client
company of an ERP and all the group companies of such client of the ERP.
7.2.2. For any client group, an ERP shall only offer one of the following two
product categories (i) ESG ratings/ certification of green debt securities or (ii)
audit of financial statements / assurance of sustainability disclosures.
7.2.3. In case an ERP wishes to migrate from offering ESG ratings/ green debt
certification to offering audit/assurance to a client-group, or vice versa, a
cooling period of one year shall be applicable.
Business Model
8.1. ERPs shall follow either of the following two business models:
8.1.1. “Subscriber-pays” business model, where the ERP derives its revenues
from ESG ratings from subscribers that may include banks, insurance
companies, pension funds, or the rated entity itself.
1 Circular No. SEBI/HO/DDHS/DDHS-POD3/P/CIR/2024/103 dated July 19, 2024
Page 18 of 68
8.1.2. “Issuer-pays” business model, where the ERP derives its revenues from
ESG ratings from the rated entity, in terms of a written contractual agreement
between such entity and the ERP, which may contain such provisions as
may be specified by SEBI.
8.2. In order to mitigate potential conflict of interests, it is mandated that ERPs shall not
follow a hybrid business model, i.e. an ERP shall not assign certain ESG rating
based on issuer-pay model, while assigning another ESG rating based on a
subscriber-pays business model.
Rating Process
9.1. Each ERP shall frame detailed guidelines on the following and disclose the same
on its website:
9.1.1. General nature of compensation arrangements with rated entities
9.1.2. Policy for request for review/appeal by Issuer against the rating being
assigned to its securities
9.1.3. Guidelines on what constitutes non-cooperation, in case of ERPs following
an issuer-pays business model.
9.1.4. Gift policy
9.1.5. Confidentiality policy
9.1.6. Policy on outsourcing of activities
9.1.7. FAQs on ratings
9.1.8. Disclosure on managing conflict of interest
9.2. Any change in the rating process or policies shall be disclosed on the ERP's
website, while also providing a reference/ hyperlink to the original provision/
process/ policy, to enable the investors to discern the changes made to the same.
9.3. An ERP shall keep the records in support of each ESG rating and review/
surveillance thereof, as applicable, including but not limited to the following:
9.3.1. The important factors underlying the ESG rating and sensitivity of such
ESG rating to changes in these factors;
Page 19 of 68
9.3.2. Summary of discussions and copies of correspondences with the issuer, its
management, auditors and bankers which have a bearing on the ESG rating,
as applicable;
9.3.3. If a quantitative model is a substantial component of the ESG rating
process, the rationale for any material difference between the ESG rating
implied by the model and the ESG rating actually assigned;
9.4. The above records should be maintained as follows and be made available to
auditors and regulatory bodies when sought by them:
9.4.1. ESG rating of listed entities: Records to be maintained at all times.
However, upon withdrawal of ESG rating, records to be maintained till 5
years from the date of withdrawal.
9.4.2. ESG rating of listed securities: Records to be maintained till 5 years from
date of maturity of such securities. However, upon withdrawal of ESG rating,
records to be maintained till 5 years from the date of withdrawal.
9.5. During the rating process, ERPs shall record minutes of the meeting with issuer
management, if any.
9.6. The process of discussion of case by circulation must be avoided, unless there is
urgency in taking a rating action.
9.7. The ERP shall, on an annual basis, undertake a review of the decisions taken by
it in that year, which would, inter alia, include:
9.7.1. ESG Ratings assigned by the ERP, including ratings assigned based on
best available information in cases of non- cooperation by the issuer.
9.7.2. Sharp changes in ratings.
9.8. The ERPs shall at all times observe high standards and fairness in conduct of the
business and any act of omission or commission in contravention of the provisions
of clauses 12 and/or 23 of Code of Conduct, as specified under Seventh Schedule
of the CRA Regulations, in letter and spirit, may result in violation of the provisions
of section 12A of the Securities and Exchange Board of India Act,1992 and SEBI
Page 20 of 68
(Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 2003.
Monitoring and Review of Ratings
10.1. Material Events requiring a review
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. [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.]2
Rating Rationale
11.1. ESG rating providers generally follow either a subscription-based business model
or an issuer-pays business model. In either of the case, there is an ESG rating
rationale or a report containing ESG rating of an entity, along with a detailed
rationale behind the assigned ESG rating.
11.2. It is essential that the ESG rating rationale be articulated in detail to enable a
stakeholder to assess the reasons behind an assigned ESG rating. This is further
necessitated by the oft-occurring divergence in ESG ratings across providers.
2 Circular No. SEBI/HO/DDHS/DDHS-PoD-3/P/CIR/2025/007 dated January 17, 2025
Page 21 of 68
11.3. Therefore, in order to provide for greater transparency in the ESG rating process,
it is proposed that the ESG rating rationale/ ESG report may contain the following
minimum disclosures:
11.3.1. Current ESG rating/score
11.3.2. Change in rating/score from the previous evaluation (direction)
11.3.3. Last review date
11.3.4. Summary of key drivers both qualitative (including controversies and their
impact) and quantitative factors considered for arriving at the overall ESG
rating
11.3.5. Pillar wise E, S and G scores – key drivers (including industry comparison
of material parameters) both quantitative and qualitative being considered
for carrying out such assessment
11.3.6. Weights of E, S and G scores in the assigned ESG rating
11.3.7. Brief explanation of rating intent to clarify if it represents unmanaged risks/
performance against risks/ impact etc. In case this is available in a
methodology document, cross-linking of the relevant document would suffice
11.3.8. Summary of or link to methodology used.
11.4. [ERPs following a Subscriber-Pays business model may share the detailed
Rating Rationales/ Rating Reports, as specified in Para 11.3, only with their
subscribers and may not disclose the same on their websites. However, ERPs
following a Subscriber-Pays business model shall disclose the ESG ratings
assigned on their website in the following format:
Name of the Sector ESG Rating Date of rating
rated issuer/
security
The above disclosure may be segregated year-wise, indicating the Business
Responsibility and Sustainability Report (BRSR) on which the ESG rating is
based.
Page 22 of 68
11.5. The rated entity/ issuer may provide its comments on the ESG rating report/ rating
rationale to the ERP in the standardised format as devised by the ESG Rating
Providers Association in consultation with SEBI. Further, the ESG Rating Providers
Association, in consultation with SEBI, has framed the standards for the
clarification to be provided by the ERP to the rated entity, balancing the minimum
information that is to be provided while maintaining confidentiality of intellectual
property of ERPs. The said format/ standards are enclosed as Annexure 5. ERPs
following subscriber-pays business model shall ensure that the said format/
standards are disclosed on their websites and are shared with the rated issuer
while sharing the ESG rating report/ rationale with the issuer.]3
11.6. Disclosure of rating sensitivities in the rating rationale
11.6.1. The disclosure of factors to which the rating is sensitive, is critical for the
end- users to understand the factors that would have the potential to impact
the ESG profile of the entity.
11.6.2. Accordingly, in order to improve transparency, the ERP shall have a
specific section on ‘Rating Sensitivities’ in the Rating Rationale which shall
explain the broad level of environmental and/ or social and/or governance
performance levels that could trigger a rating change, upward and
downward.
11.6.3. Such factors shall be disclosed in quantitative terms to the extent possible,
discernible to the investors, and should not read like a general risk factor.
Provisions applicable to ERPs following an issuer-pays business model
12.1. Rating Agreement between issuer and ERP:
12.1.1. The ERP shall enter into a written agreement with each client who (or
whose securities) the ERP proposes to rate, and such agreement shall
include the following provisions, namely:
3 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
Page 23 of 68
12.1.1.1. the rights and liabilities of each party in respect of the ESG rating shall
be defined;
12.1.1.2. the fee to be charged by the ERP shall be specified;
12.1.1.3. the client shall co-operate with the ERP in order to enable the latter to
carry out periodic review of the ESG rating during the tenure of the rated
instrument or validity of ESG rating;
12.1.1.4. the client shall co-operate with the ERP in order to enable the latter to
arrive at, and maintain, a true and accurate ESG rating of the client or
clients securities and shall in particular provide to the latter, true,
adequate and timely information for the purpose.
12.1.1.5. the ERP shall disclose to the client the ESG rating assigned to the latter
(or its securities) through regular methods of dissemination;
12.1.1.6. The client (issuer) agrees to disclose the history and status (non-
cooperation, non-payment of fees etc.) of previous rating relation with
the earlier ERP(s) to the new ERP along with reasons for non-
cooperation, etc. if applicable."
12.1.1.7. The client (issuer) agrees to provide the information sought by the ERP
immediately, but not later than 7 days from the date of seeking such
information by the ERP.
12.1.2. ERPs following an issuer-pays business model shall refrain from giving
Indicative Ratings without having a written agreement in place. In case such
Indicative Ratings are provided by the ERP, it shall be considered as aiding
and abetting the Issuer in suppression of material information by the ERP
which would be in contravention of Clause 12 of Code of Conduct of ERPs
and may result in violation of the provisions of section 12A of the Securities
and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent
and Unfair Trade Practices relating to Securities Market) Regulations, 2003
by the ERP.
12.2. Issuer-Not-Cooperating:
Page 24 of 68
12.2.1. Regulation 28M provides that if the rated issuer or the issuer whose
securities are rated by the ERP refuses to co-operate with the ERP regarding
review of the ESG rating, despite being under a contractual obligation to do
so, the ERP shall review the ESG rating on the basis of the best available
information.
12.2.2. In case of non-cooperation by the issuer (such as not providing
information required for rating, non-payment of fees for conducting
surveillance), in line with the existing Regulations, the ERP shall continue to
review the ESG rating, on an ongoing basis throughout the rating’s lifetime,
on the basis of best available information, in accordance with CRA
Regulations and circulars issued thereunder as well as the ERP’s ESG rating
process and policies.
12.2.3. ERPs shall have a detailed policy in this respect which shall include (but
not be limited to) the following:
12.2.3.1. The criteria/ methodology in respect of assessing the risk of non-
availability of information from the issuers including non-cooperative
issuers.
12.2.3.2. The steps to be taken under various scenarios in order to ascertain the
status of non-cooperation by the issuer company.
12.2.4. ERPs shall also formulate a policy on “Minimum/ Indicative Information
requirement” in terms of various sectors or types of ratings (limited to ESG
ratings of securities that are listed, or proposed to be listed, on a recognized
stock exchange, and other ESG ratings that are required under various SEBI
Regulations or circulars issued thereunder), etc. and disclose it on their
website.
12.2.5. In case of non-cooperation by the issuer, the ESG rating symbol shall be
accompanied by the suffix “ISSUER NOT COOPERATING*”in the same font
Page 25 of 68
size. The suffix shall be explained below and shall read as ‘Issuer did not
cooperate; based on best available information’.
12.2.6. Information to be disclosed through the Rating Rationale: The rating
action(s) in such cases shall be promptly disclosed through rating
rationale(s), which shall mention, at least, the following:
12.2.6.1. Date of the Rating Rationale
12.2.6.2. Details of security / entity
12.2.6.3. Rating Action and Indicative/updated rating based on best available
information
12.2.6.4. A brief write-up on the non-co-operation by the Issuer/ Borrower and the
consistent follow-up done by the ERP for getting the information.
12.2.6.5. Hyperlink/ reference to the applicable "Criteria"
12.2.6.6. Limitations regarding information availability (shall have a suitable
caveat cautioning the investors/lenders /public)
12.2.6.7. Rating History for last three years
12.2.6.8. Name and contact details of the Rating Analyst(s)
12.2.7. In case an issuer, having not co-operated with an ERP in the past,
approaches another ERP, following an issuer-pays business model, for ESG
rating, the new ERP shall, in its Rating Rationale, disclose the aspect of non-
co-operation.
12.2.8. No ERP, following an issuer-pays business model, shall assign any new
ratings to an issuer, if the issuer is categorized as non-cooperative with all
the ERPs for a continuous period of preceding 12 months, until the issuer
resumes cooperation or the rating is withdrawn.
Withdrawal of ratings
13.1. Regulation 28M of CRA regulations prescribe, inter-alia, that an ERP shall not
withdraw an ESG rating except in cases where the rated issuer, or the issuer whose
security is rated, is wound up or merged or amalgamated with another company,
Page 26 of 68
or except in cases as may be specified by SEBI from time to time. Further, subject
to CRA Regulations, ERP shall withdraw an ESG rating as per its documented
policies which shall also be disclosed on its website. In this regard, an ERP shall
adhere to the provisions of this circular in withdrawal of any ESG rating.
13.2. [In addition to the cases specified in Regulation 28M of the SEBI (Credit Rating
Agencies) Regulations, 1999, the following is being specified:
13.2.1. For ERPs following a Subscriber-Pays business model:
i. The ERP may withdraw a rating provided that there are no subscribers for
the rating as on the date of withdrawal.
ii. 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.
iii. Once withdrawn, the ERP shall ensure that such withdrawn rating is not
made available to any subscriber in future.
iv. The ERP may withdraw the rating for an issuer/ rated entity in case of non-
availability of the Business Responsibility and Sustainability Report
(BRSR) for such issuer/ rated entity.
13.2.2. For ERPs following an Issuer-Pays business model:
i. In case of rating of a security, the ERP may withdraw the 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.
Page 27 of 68
ii. In case of rating of an issuer/ entity, the ERP may withdraw the rating
subject to the ERP having rated the issuer/ entity continuously for 3 years.]4
13.3. Rating Rationale for Withdrawal of Rating of a rated entity/ security: At the time of
withdrawal of any ESG rating of entities/securities that are listed, or proposed to be
listed, on a recognized stock exchange, and other ESG ratings that are required
under various SEBI Regulations or circulars issued thereunder, the ERP shall
assign a rating to such entity/security and issue a rating rationale, which shall also
mention the reason(s) for withdrawal.
Request by Issuers for review/appeal of ratings provided by ERPs
Cases of request by an issuer for review/appeal of the ESG rating(s) provided to it or its
security/ies shall be reviewed by a team/ panel that shall consist of majority of members that
are different from those involved in the assignment of the earlier ESG rating, and at least one-
third of members are independent. ("Independent" would mean people not having any
pecuniary relationship with the ERP or any of its employees).
Governance Norms of ERPs
15.1. MD/ CEO of an ERP and any person within ERP who has business responsibility
shall not interfere in the determination of ESG rating.
15.2. At least one third of the board of an ERP shall comprise of independent directors,
if the board is chaired by a non-executive director. In case the board of the ERP is
chaired by an executive director, at least half of the board shall comprise of
independent directors.
15.3. The board of an ERP shall constitute the following committees:
15.3.1. ESG Ratings Sub-Committee
15.3.2. Nomination and Remuneration Committee
15.4. The Rating team of an ERP shall report to a Chief Ratings Officer (CRO).
4 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
Page 28 of 68
15.5. The Chief Ratings Officer (CRO) shall directly report to the ESG Ratings Sub-
Committee of the board of the ERP.
15.6. The Nomination and Remuneration Committee shall be chaired by an independent
director.
15.7. [Considering the challenges faced by Category II ERPs in the initial years of
operation, the requirement for constitution of an ESG Ratings Sub-Committee and
Nomination and Remuneration Committee (NRC), as mentioned in Para 15.3, shall
become effective for Category II ERPs from April 29, 2027. 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.]5
Accountability of Rating Analysts of ERPs
16.1. Roles and responsibilities of the ESG rating analysts/team of ERPs shall be clearly
laid out by the ERP.
16.2. Analysts or other members of the ESG rating team shall be responsible for
undertaking the ESG rating process and adhering to the timelines as specified by
the ERP.
Dealing with Conflict of interest
17.1. An ERP shall formulate the policies and internal codes for dealing with the conflict
of interest.
17.2. An ERP shall ensure:
17.2.1. that its analysts do not participate in any kind of marketing and business
development including negotiations of fees with the issuer who is being rated
or whose securities are being rated,
17.2.2. that the employees’ involved in the ESG rating process and their
dependents do not have ownership of the shares of the issuer.
5 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
Page 29 of 68
17.2.3. prompt review of the ESG ratings of the entities/securities as and when
any of its employees joins the respective issuer.
17.3. Guidelines for dealing with Conflict of Interest for investment/ trading by ERPs,
Access Persons and other employees
17.3.1. These Guidelines shall be applicable in case of investment / trading by
ERPs and Access Persons connected to ERPs and in case of disclosures to
all employees of ERPs.
17.3.2. Explanation: "Access Persons" means officials of ERP appointed as Chief
Executive or by any other designation (such as CEO/MD/President or by
whatever name called who are performing functions similar to those of the
Chief Executive), the employees of ERP doing the function of analyst, or
compliance, or heads of the departments or divisions or any other employee
as decided by ERP.
17.3.3. These guidelines shall cover transactions for purchase or sale of
securities either individually or jointly or in the name of their dependents or
as a member of HUF.
17.3.4. With a view to adopting best industry practices and systems by ERPs for
managing conflict of interest in case of investment/ trading in securities
(except schemes of Mutual Funds) done by ERPs or their Access Persons
as defined hereunder, the following guidelines, framed in consultation with
ERPs are laid down:
17.3.4.1. ERPs shall adopt adequate systems, procedures and policies to ensure
that they address conflict of interest while making their own investments
in securities.
17.3.4.2. The ERPs, their employees and Access Persons shall not take undue
advantage of any price sensitive information that they may have about
any company.
17.3.4.3. Access Persons to seek prior approval for transactions
a. An Access Person shall apply to the Compliance Officer for prior
approval of transactions for purchase or sale of securities of the
companies which have been rated by the ERP or whose
securities/instruments/facilities have been rated by the ERP.
Page 30 of 68
b. The Compliance Officer of the ERP shall apply to the Chief
Executive of the ERP for such prior approval.
c. The CEO/Compliance Officer shall ensure that there is no conflict of
interest while considering the request for prior approval.
d. Such approvals, if granted, shall be valid for 7 working days from
the date of approval.
17.3.4.4. Disclosures
a. Any person, who becomes an employee of the ERP, shall submit a
statement of holding of all securities in respect of persons
mentioned at para 17.3.2 above to the Compliance officer or Chief
Executive, as the case may be, within 7 working days of joining
ERP.
b. All employees of ERP including the Access Persons shall submit the
following details to the CEO/Compliance Officer, as the case may
be:
i. Details of purchase or sale transactions effected within 7 working
days from the date of transaction.
ii. A consolidated statement of holding of all securities within 30
working days from the end of the Financial Year.
c. The members of the Rating Committee shall upfront declare /
disclose their interest, if any, to the Chief Executive Officer or
Compliance Officer, as per the policy of the ERP, in the
securities/instruments/facilities that are considered for rating by the
ERP.
17.3.4.5. Restrictions on employees holding ownership of securities of the
issuer: An ERP shall ensure that employees involved in the rating
process shall not have ownership of the securities of the issuer.
Guidelines on listed securities/instruments/products falling under the purview of
other financial sector regulator/s or authority/ies’
Page 31 of 68
Certain instruments/products/securities are regulated by other financial sector regulator/s
or authority/ies and could be listed or unlisted. The issuers of such
instruments/products/securities and any person connected therewith (such as ERPs) shall
abide by the rules/regulations/directions/guidelines applicable to or governing such
instruments/products/securities as prescribed by such financial sector regulator or authority
whether such instruments/products/securities be listed or unlisted.
Further, if such instruments/products/securities are listed on a Recognised Stock Exchange
or provided to/availed by regulated entities or intermediaries within the Indian Securities
Market, the rules/ regulations/ directions/ guidelines specified by SEBI from time to time
shall be applicable.
Page 32 of 68
Chapter III : Reporting and Disclosures
Periodic Disclosures
19.1. An ERP shall make all the disclosures stipulated below on their websites. In case
of listed entities/securities, the ERP shall also make disclosures to the stock
exchanges as specified in the CRA Regulations. For ratings assigned and their
periodic reviews, the ERP shall disclose ESG ratings on their websites. Where a
specific format has been prescribed, the disclosures shall be made in that format.
19.2. An ERP can make additional disclosures other than those stipulated in CRA
Regulations or circulars issued thereunder with the prior approval of its board.
19.3. Disclosures by ERPs on annual basis: ERP shall make following disclosures within
30 days from the end of each financial year (March):
19.3.1. Disclosures on ESG rating History and movement:
19.3.1.1. A Rating Summary Sheet presenting a snapshot of the rating actions
carried out during the year shall be uploaded by the ERPs on their
websites, in the format specified at Annexure 6. The disclosure in the
“Rating Distribution for outstanding ratings as on 31st March” section of
Annexure 6 shall also include number of INC ratings outstanding in each
category also, if applicable.
19.3.1.2. Details of new ESG ratings assigned during last year (Annexure 7)
19.3.1.3. Movement of ESG rating of all outstanding listed entities/ securities
during the last year (Annexure 8),
19.3.1.4. The history of ESG rating of all outstanding listed entities/ securities
(Annexure 9),
19.3.2. Disclosure of Average Rating Transition Rates
19.3.2.1. Regulation 28K of CRA Regulations requires an ERP to publish its
average one-year ESG rating transition rate on its respective website,
in a manner as may be specified by SEBI;
Page 33 of 68
19.3.2.2. Transition studies are central to evaluating the performance of an ERP
and provide an insight on the stability of ratings over a period of time. In
order to promote transparency and to enable the market to best judge
the performance of the ratings, the ERP should publish information
about the historical average rating transition rates across various rating
categories, so that investors can understand the historical performance
of the ratings assigned by the ERPs.
19.3.2.3. ERPs shall publish their average one-year rating transition rate over a
3-year period, on their respective websites, which shall be calculated as
the weighted average of transitions for each rating category, across all
static pools in the 3-year period.
19.3.2.4. The format of the disclosure of transition rates is enclosed as Annexure
10. For the said purpose, the following terms shall have the meaning as
under:
a. Static Pool: ESG Ratings outstanding for each category at the
beginning of any financial year. However, it shall exclude ratings that
have been withdrawn or ratings of non-cooperative issuers, if
applicable, during the financial year.
b. Transition Rate: The number of movements/ transitions from each
rating category to another, as at the end of the financial year, as a
percentage of the total number of ratings in the static pool.
c. Averaging: All averaging across static pools for transition rate
computations must be based on the weighted average method
where the weights are the number of issuers in each static period.
19.3.2.5. ERPs shall also disclose two additional and separate rating transition
matrices (limited to ESG ratings of entities or securities that are listed,
or proposed to be listed, on a recognized stock exchange) using the
following definition of static pool:
Page 34 of 68
a. Static Pool: Ratings outstanding for each category at the beginning
of any financial year. It shall exclude ratings that have been
withdrawn or ratings of non-cooperative issuers, if applicable, during
the financial year.
b. Static Pool: Ratings outstanding for each category at the beginning
of any financial year. It shall include ratings that have been
withdrawn or ratings of non-cooperative issuers, if applicable, during
the financial year.
19.3.2.6. In the disclosure at para 19.3.2.5 (b) above, an ERP shall include an
additional column to indicate the proportion of ratings that were
withdrawn during the financial year.
19.3.3. Income: An ERP shall disclose:
19.3.3.1. An ERP shall disclose the general nature of its compensation
arrangements with the issuers.
19.3.3.2. its total receipt from ESG rating services and non-ESG rating services,
19.3.3.3. issuer wise percentage share of non-ESG rating income of the ERP and
its subsidiary to the total revenue of the ERP and its subsidiary from that
issuer, and
19.3.3.4. names of the rated issuers who along with their associates contribute
10% or more of total revenue of the ERP and its subsidiaries.
Continuous Disclosures
20.1. An ERP shall make all the disclosures stipulated below on their websites and
maintain the same at all times.
20.2. The rating history, Rating Rationales and Rating Reports, including those ratings
which have been withdrawn, shall be available on the ERP's website.
20.3. Disclosures in case of delay in periodic review:
Page 35 of 68
20.3.1. Regulation 28M of CRA Regulations prescribe that an ERP shall annually,
or if required, more frequently, review each of the published ESG ratings,
unless the ESG rating is withdrawn in accordance with these regulations.
20.3.2. Accordingly, each ERP shall promptly disclose on its website details of all
such ratings where the review became due but was not completed by the
due date. Details disclosed shall include the name of the company, security
type (if applicable), date of last review, reasons for delay in periodic review,
hyperlink to the last Rating Rationale etc.
20.4. Disclosure of guidelines for dealing with Conflict of Interest: The policies adopted
by the ERPs for effective implementation of guidelines for dealing with Conflict of
Interest for investment/ trading by ERPs, Access Persons and other employees,
shall be disclosed on the ERPs’ website.
20.5. Shareholding: An ERP shall disclose its shareholding pattern as prescribed by
stock exchanges for a listed company under Regulation 31 of Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015.
20.6. Compliance with recommendations of the International Organization of Securities
Commissions (IOSCO):
20.6.1. An ERP shall disclose the compliance status of:
20.6.1.1. Recommendations for ESG ratings products providers specified in
IOSCO report FR09/21 dated November 2021.
20.6.1.2. Good practices for ESG rating providers specified in IOSCO call for
action dated November 2022.
20.6.2. In case of any non-compliance with any provision of the above, the ERP
shall disclose rationale for divergence from the IOSCO recommendations
and good practices.
Page 36 of 68
20.7. Disclosure of Rating Rationale on the website of Stock Exchange(s):6
20.7.1. For ESG ratings of an issuer/ entity, the stock exchange where such issuer
is listed shall prominently disclose the ESG rating on its website under a
separate tab/ section on the listed company’s page.
20.7.2. For ESG ratings of a debt security, the stock exchange where the security is
listed shall prominently disclose the ESG rating on its website under a
separate tab/ section on the listed security’s page.
20.7.3. The format for disclosure of ESG ratings, as specified in Paras 20.7.1 and
20.7.2, shall be as under:
Name Symbol or Sector ESG Date ERP Business ESG Rating
of the ISIN, as rating of Name Model of Press
rated applicable rating ERP (i.e. Release
issuer Subscriber-
(PDF
or pays or
attachment)
security Issuer-
pays)
Details in the above format shall be provided by the ERP to the relevant stock
exchange(s).
Guidelines on manner of disclosures by ERPs on its website:
21.1. In order to facilitate enhanced transparency and usability of disclosures made by
ERPs on their websites, the following is directed:
21.1.1. Disclosures required by ERPs on their websites under various SEBI
circulars should be provided in excel / machine readable format.
21.1.2. An archive of all disclosures should be maintained by ERPs on their
website, for at least 10 years. This also includes rating rationales by ERPs.
6 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
Page 37 of 68
21.1.3. ERPs may add footnotes in the disclosures mandated by SEBI for
purpose of better understanding of methodology of such disclosure by
stakeholder’s subject to methodology explained being in line with the SEBI
Regulations and circulars issued thereunder.
Page 38 of 68
Chapter IV : Internal Audit for ERPs
Internal Audit for ERPs:
22.1. The audit envisaged under Regulation 22S of the CRA Regulations shall include an
internal audit to be undertaken in the following manner:
22.1.1. It shall be conducted on a yearly basis.
22.1.2. It shall be conducted by Chartered Accountants, Company Secretaries or
Cost and Management Accountants who are in practice and who do not have
any conflict of interest with the ERP.
22.1.3. It shall cover all aspects of ERP operations and procedures, including
investor grievance redressal mechanism, compliance with the requirements
stipulated in the SEBI Act, Rules and Regulations made thereunder, and
guidelines issued by SEBI from time to time.
22.1.4. The report shall state the methodology adopted, deficiencies observed,
and consideration of response of the management on the deficiencies.
22.1.5. The report shall include a summary of operations and of the audit, covering
the size of operations, number of transactions audited and the number of
instances where violations / deviations were observed while making
observations on the compliance of any regulatory requirement.
22.1.6. The report shall comment on the adequacy of systems adopted by the ERP
for compliance with the requirements of regulations and guidelines issued by
SEBI and investor grievance redressal.
22.2. [Considering the challenges faced by Category II ERPs in the initial years of
operation, the requirement to conduct internal audit shall become effective for
Category II ERPs from April 29, 2027.]7
Requirements related to Internal Audit of ERPs:
23.1. Eligibility of Auditors for conducting the Internal Audit of the ERP:
7 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
Page 39 of 68
23.1.1. The audit firm shall have a minimum experience of three years in the
financial sector.
23.1.2. The internal auditor of an ERP shall declare that:
23.1.2.1. The firm has not been employed by other ERPs for any other services
(such as statutory audit, taxation, consultancy/ retainership etc.) in the
past two years, and
23.1.2.2. The partners/ firm do not have any association with any other ERP.
23.1.3. The audit team must be composed of, at least, a Chartered Accountant
(ACA/ FCA) [or a Cost Accountant (ACMA/ FCMA)]8 and a Certified
Information Systems Auditor/ Diploma in Information Systems Auditor/
[Diploma in Information System Security Auditor]9 (CISA/ DISA/ DISSA).
23.2. Rotation of Internal Auditors: An auditor shall be appointed for a maximum term of
five years, with a cooling-off period of two years.
23.3. Scope of the Internal Audit: The internal audit shall examine compliance of the ERP
with CRA Regulations and this circular. Such examination shall include but not be
limited to following checks:
23.3.1. Whether the ERP maintains the minimum net worth requirement under
CRA Regulations.
23.3.2. Status of targets / projections submitted by the ERP to SEBI during its
application for registration.
23.3.3. ERP and its employees, who are associated directly or indirectly with the
rating business, have complied with the regulations and code of conduct.
23.3.4. ERP has defined processes for operations that have been followed during
the rating exercise.
23.3.5. Policy in respect of non-cooperation by the issuer, if applicable, including
procedures to be followed for the same, have been complied with.
23.3.6. Review of ratings has been carried out as per the review policy of the ERP.
8 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
9 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
Page 40 of 68
23.3.7. Verify the rating disclosures made by the ERPs on their website.
23.3.8. Comment on the conflict of interest, if any.
23.3.9. The audit shall also cover adherence to the prescribed methodology for
calculation of transition rates.
23.3.10. Compliance by ERP with the provisions of all the Circulars shall be verified
during yearly Internal Audit.
23.4. Action on the Internal Audit Report:
23.4.1. The ERP shall receive the report of the internal audit within two months
from the end of the year.
23.4.2. Upon receipt of the internal audit report, the Compliance Officer of the ERP
shall provide detailed comments on each of the observations therein and
place the same before the Board of the ERP.
23.4.3. The final action taken report, including the comments/ recommendations
made by Compliance Officer and the Board of the ERP as well as the
corrective steps taken by the ERP, shall be submitted to SEBI within 2 months
from the date of receipt of the internal audit report or 1 month from the date of
Board Meeting of the ERP, whichever is later, in the following format:
Sr. Observations Remarks by the Comments Corrective
No. of the auditor Compliance of the Board actions
Officer of the ERP taken
23.4.4. All ERPs shall report the following change(s) to SEBI while submitting the
Action Taken Report:
23.4.4.1. Amalgamation, demerger, consolidation or any other kind of corporate
restructuring falling within the scope of section 230 of the Companies Act,
2013 or the corresponding provision of any other law for the time being
in force;
23.4.4.2. Change in Director, including managing director/ whole-time director;
23.4.4.3. Change in shareholding not resulting in change in control.
23.4.4.4. If there is no change during the relevant year, it shall be indicated in the
report.
Page 41 of 68
Chapter V : Miscellaneous
Designated e-mail ID for regulatory communication with SEBI:
24.1. SEBI has been communicating with the registered market intermediaries inter-alia
ERPs through circulars, letters, directions etc. In order to facilitate the issuance of
digitally signed circulars, all registered ERPs are required to create a designated
email ID for regulatory communications. This email ID shall be an exclusive email
ID only for the above purpose and should not be a person centric email ID.
24.2. The Designated e-mail ID shall be communicated to SEBI by emailing a file in an
excel format to intermediary@sebi.gov.in and erp@sebi.gov.in, as per the format
prescribed below.
24.3. The name of the file and the subject of the email shall be in the following format: –
“ESG Rating Provider – <name of the ERP>”
24.4. The file shall contain the following details:
Name Address Category Registrat Designated Name of
ion No. email ID compliance
officer
Information regarding Grievance Redressal Mechanism:
25.1. For information of all investors who deal/ invest/ transact in the market, the
information as provided below shall be prominently displayed in the offices of the
ERPs:
Dear Investor,
In case of any grievance / complaint against the ESG rating provider:
Please contact Compliance Officer of the ESG rating provider (Name and Address) / email-id
(xxx.@email.com) and Phone No. - 91-XXXXXXXXXX.
You may also approach CEO / Partner / Proprietor (Name) / email-id (xxx.@email.com) and
Phone No. - 91-XXXXXXXXXX.
If not satisfied with the response of the ERP you can lodge your grievances with SEBI at
http://scores.gov.in or you may also write to any of the offices of SEBI. For any queries, feedback
or assistance, please contact SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575.
Page 42 of 68
Guidelines on Outsourcing of Activities by ERPs
26.1. Outsourcing may be defined as the use of one or more than one third party – either
within or outside the group - by a registered ERP to perform the activities associated
with services which the ERP offers.
26.2. The principles for outsourcing by ERPs have been framed (Annexure 11). These
principles shall be followed by all ERPs registered with SEBI.
26.3. The SEBI registered ERPs desirous of outsourcing their activities shall not, however,
outsource their core business activities and compliance functions.
26.4. The SEBI registered ERPs shall be responsible for reporting of any suspicious
transactions / reports to FIU or any other competent authority in respect of activities
carried out by the third parties.
General Guidelines for dealing with Conflicts of Interest of ERPs and their
Associated Persons in Securities Market:
27.1. ERPs are presently governed by the provisions for avoidance of conflict of interest
as mandated in the CRA Regulations read with relevant circulars issued from time
to time by SEBI.
27.2. On the lines of Principle 8 of the International Organization of Securities
Commissions (IOSCO) Objectives and Principles of Securities Regulations, it has
been decided to put in place comprehensive guidelines to collectively cover ERPs
and their associated persons, for elimination of their conflict of interest, as detailed
hereunder.
27.3. ERPs shall adhere to these guidelines for avoiding or dealing with or managing
conflict of interest. They shall be responsible for educating their associated persons
for compliance of these guidelines.
Page 43 of 68
27.4. For the purpose of these guidelines "associated persons" have the same meaning
as defined in Securities and Exchange Board of India Certification of Associated
Persons in the Securities Markets) Regulations, 2007.
27.5. ERPs and their associated persons shall:
27.5.1. lay down, with active involvement of senior management, policies and
internal procedures to identify and avoid or to deal or manage actual or
potential conflict of interest, develop an internal code of conduct governing
operations and formulate standards of appropriate conduct in the
performance of their activities, and ensure to communicate such policies,
procedures and code to all concerned;
27.5.2. at all times maintain high standards of integrity in the conduct of their
business;
27.5.3. ensure fair treatment of their clients and not discriminate amongst them;
27.5.4. ensure that their personal interest does not, at any time conflict with their
duty to their clients and client’s interest always takes primacy in their advice,
investment decisions and transactions;
27.5.5. make appropriate disclosure to the clients of possible source or potential
areas of conflict of interest which would impair their ability to render fair,
objective and unbiased services;
27.5.6. endeavor to reduce opportunities for conflict through prescriptive measures
such as through information barriers to block or hinder the flow of information
from one department/ unit to another, etc.;
27.5.7. place appropriate restrictions on transactions in securities while handling a
mandate of issuer or client in respect of such issuer/security so as to avoid
any conflict;
27.5.8. not deal in securities while in possession of material non - published
information
27.5.9. not to communicate the material non-published information while dealing
in securities on behalf of others
27.5.10. not in any way contribute to manipulate the demand for or supply of
securities in the market or to influence prices of securities;
Page 44 of 68
27.5.11. not have an incentive structure that encourages sale of products not
suiting the risk profile of their clients;
27.5.12. not share information received from clients or pertaining to them, obtained
as a result of their dealings, for their personal interest;
27.6. The Board of ERPs shall put in place systems for implementation of these guidelines
and provide necessary guidance enabling identification, elimination or management
of conflict of interest situations. The Board of ERP shall review the compliance of
this circular periodically.
27.7. These guidelines shall be in addition to the provisions, if any, contained in respective
regulations/ circulars issued by SEBI from time to time regarding dealing with conflict
of interest, in respect of such entities
Standardization of Industry classification - Applicability to ERPs
28.1. The Market Data Advisory Committee (MDAC), a standing committee constituted by
SEBI, comprising of representatives from stock exchanges, depositories and other
market participants, examined the existing industry classification structures, across
sectors, and developed a harmonised four level industry classification framework for
adoption by all stakeholders and for all relevant processes/ purposes in Indian
securities market.
28.2. As the standardized framework will help bring about uniformity in the classifications
being used across sectors and in securities market, ERPs are advised to use this
standardized industry classification published by recognized Stock Exchanges for
the purpose of rating exercise, peer benchmarking, research activities including
research for Economy, Industries and Companies etc.
28.3. Further, as the standardized industry classification will be reviewed and published
by Stock Exchanges on periodical basis, in view of same, ERPs are directed to
follow the standardized industry classification published by Stock Exchanges from
time to time.
Page 45 of 68
Firewall between ERPs and their Affiliates:
29.1. The following measures are mandated to strengthen the firewall between SEBI-
registered ERPs and their non-ERP entities (i.e. associates or subsidiary or group
entity of the ERP):
29.1.1. ERPs shall formulate a policy on separation or firewall practices with the
non-ERP entities and document the same. Such policy, and revisions thereto,
shall be ratified by the Board of Directors of the ERPs and the policy may
cover inter-alia the following:
29.1.1.1. Nature and extent of sharing of infrastructure, officials/employees or
resources, if any, between the ERP and the non-ERP entity, including
specification on whether such arrangement is temporary.
29.1.1.2. Measures taken by ERP to ensure the independence of its ESG rating
process in view of the above arrangement with the non-ERP entity.
29.1.1.3. Guidance to employees on sharing of information or resources, if any,
between the ERP and the non-ERP entity in order to mitigate any
potential or actual conflict of interest.
29.1.2. An ERP shall disclose on its website, details of any common director or
Chief Executive Officer or Managing Director between the ERP and the non-
ERP entity. Such disclosure shall be updated by the ERP on the first working
day of each month. The disclosure should include a reference to the date it
was last updated by the ERP, along with a reference or hyperlink to archives
of previous such disclosures.
29.1.3. The websites of SEBI-registered ERPs and their non-ERP entities shall be
separate. An ERP’s website may contain hyperlinks to the separate websites
of the non-ERP entities.
Page 46 of 68
Annexures
Annexure 1
Declaration-Cum-Undertaking for change in control
We M/s. (Name of the ERP/the acquirer/person who shall have the control), hereby
declare and undertake the following with respect to the application for prior approval
for change in control of (name of the ERP along with the SEBI registration no.):
1. The applicant/ERP (Name) and its principal officer, the directors or managing
partners, the compliance officer and the key management persons and the
promoters or persons holding controlling interest or persons exercising control
over the applicant, directly or indirectly (in case of an unlisted applicant or ERP,
any person holding twenty percent or more voting rights, irrespective of whether
they hold controlling interest or exercise control, shall be required to fulfill the ‘fit
and proper person’ criteria) are fit and proper person in terms of Schedule II of
SEBI (Intermediaries) Regulations, 2008.
2. We bear integrity, honesty, ethical behaviour, reputation, fairness and character.
3. We do not incur following disqualifications mentioned in Clause 3(b) of Schedule
II of SEBI (Intermediaries) Regulations, 2008 i.e.
(i) No criminal complaint or information under section 154 of the Code of
Criminal Procedure, 1973 (2 of 1974) has been filed against us by SEBI and
which is pending.
(ii) No charge sheet has been filed against us by any enforcement agency in
matters concerning economic offences and is pending.
(iii) No order of restraint, prohibition or debarment has been passed against us
by SEBI or any other regulatory authority or enforcement agency in any matter
concerning securities laws or financial markets and such order is in force.
(iv) No recovery proceedings have been initiated by SEBI against us and are
pending.
(v) No order of conviction has been passed against us by a court for any offence
involving moral turpitude.
(vi) No winding up proceedings have been initiated or an order for winding up
has been passed against us.
(vii) We have not been declared insolvent.
Page 47 of 68
(viii) We have not been found to be of unsound mind by a court of competent
jurisdiction and no such finding is in force.
(ix) We have not been categorized as a wilful defaulter.
(x) We have not been declared a fugitive economic offender.
4. We have not been declared as not ‘fit and proper person’ by an order of SEBI.
5. No notice to show cause has been issued for proceedings under SEBI
(Intermediaries) Regulations, 2008 or under section 11(4) or section 11B of the
SEBI Act during last one year against us.
6. It is hereby declared that we and each of our promoters, directors, principal officer,
compliance officer and key managerial persons are not associated with vanishing
companies.
7. We hereby undertake that there will not be any change in the Board of Directors
of incumbent, till the time prior approval is granted.
8. We hereby undertake that pursuant to grant of prior approval by SEBI, the
incumbent shall inform all the existing investors/ clients about the proposed
change prior to effecting the same, in order to enable them to take informed
decision regarding their continuance or otherwise with the new management.
The said information is true to our knowledge.
(stamped and signed by the Authorised Signatories)
Page 48 of 68
Annexure 2
Letter of Representation for ESG Rating Provider
Securities and Exchange Board of India
Ma’am / Dear Sir,
Sub: Surrender of Certificate of Registration as ESG Rating Provider, Registration No. .
1. We hereby surrender our certificate of registration as ESG Rating Provider.
2. We enclose the original certificate of registration (or indemnity in case the certificate is lost
or stolen) for cancellation.
3. We hereby confirm that:
a. no complaint /disciplinary proceeding is pending against us;
b. no investigation / inquiry by SEBI is pending against us with respect to our activities as
an ESG Rating Provider;
c. as on date of application, we have paid all fees;
d. we shall continue to be liable for all liabilities/obligations (including monetary penalties,
if any) for violations, if any, of the provisions of the SEBI Act and the SEBI (Credit
Rating Agencies) Regulations, 1999 that have taken place before our surrender of
certificate of registration;
e. all our current assignments as an ESG Rating Provider have been either duly
terminated or transferred to another registered ESG Rating Provider with registration
no.;
f. we have issued a public notice in a widely circulated national and a vernacular daily
dated informing surrender of our registration as ESG rating Provider (Please
enclose a clipping of the said public notice);
g. we have notified the Depositories and all the stock exchanges where our client
companies are listed about the surrender of our registration.
4. *We hereby request SEBI to dispense with the procedure laid down in Regulation 16(1) of
the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty)
Regulations, 2002 while processing our request for surrender of certificate of registration.
Thanking you,
Yours faithfully,
Name:
(Whole time/Managing Director/Principal Officer)
* Please strike off, if not applicable.
Page 49 of 68
Annexure 3
List of ESG Parameters with an Indian Context
E/S/G Pillar Factors Data Point
Parameters
Perform, Achieve and Trade (PAT) - Does the entity have any sites / facilities identified as designated consumers
Environmen (DCs) under the Performance, Achieve and Trade (PAT) Scheme of the Government of India? (Y/N) If yes,
Energy
t disclose whether targets set under the PAT scheme have been achieved. In case targets have not been
achieved, provide the remedial action taken, if any.
Environmen
Water Zero Liquid Discharge - Has the entity implemented a mechanism for Zero Liquid Discharge
t
Waste Extended Producer Responsibility (EPR) - Extended Producer Responsibility (EPR) is applicable to the entity’s
Environmen
Manageme activities (Yes / No). If yes, whether the waste collection plan is in line with the Extended Producer Responsibility
t
nt (EPR) plan submitted to Pollution Control Boards?
Land Use
Environmen Does the company have operations in or around ecologically sensitive areas (such as national parks, wildlife
and
t sanctuaries, biosphere reserves, wetlands, biodiversity hotspots, forests, coastal regulation zones etc.)?
Biodiversity
Environmen Amount spent in CSR as a percentage of regulatory requirement on a look-through basis i.e. where CSR
CSR
t and Social activities are undertaken by trusts / foundations, whether the funds have been actually utilized by these entities
Inclusive
Social developme Job creation in smaller towns
nt
Inclusive
Percentage of input material (inputs to total inputs by value) sourced from suppliers: - (i) Directly sourced from
Social developme
MSMEs/ small producers, (ii) Directly from within India
nt
Social Diversity Disclosure of wages and salary by gender (%)
Social Diversity Job creation and availability of infrastructure conducive for differently abled
Governance Compliance Does the company have a RegTech / Systems solution for monitoring and evidencing compliance
Page 50 of 68
E/S/G Pillar Factors Data Point
Governanc
Governance Percentage of "against" votes amongst non-promoter shareholders on appointment of independent directors
e
Related
Party
Governance Percentage of "against" votes amongst non-promoter shareholders on RPTs
Transaction
s
Royalty payments - Is the increase in royalty over the last five years higher than increase in PBT? If yes
Governance Royalty
provide values for last 5 years and the reason for increased royalty.
Share of RPTs (as respective %age) in -
Related • Purchases
Party • Sales
Governance
Transaction • Loans & advances
s • Investments
(except for PSUs)
Guidance
ERPs should consider India specific standards/ laws/guidelines for rating of energy efficiency/green building initiatives (eg. GRIHA,
1
IGBC or Energy Conservation Building Code (ECBC)etc.)
ERPs should consider India specific standards/laws/guidelines for rating of air emissions (eg. ZED certifications, emission regulations
2
under AIR Act, Continuous Emissions Monitoring System requirements etc.)
ERPs should consider India specific standards/laws/guidelines for rating of GHG emissions (eg. Initiatives and targets under Perform,
3 Achieve and Trade (PAT) scheme, National Action Plan on Climate Change, Environment Protection Act, Ozone Depleting
Substances Rules, CPCB/SPCB Guidelines, India GHG Programme etc.)
ERPs should consider India specific standards/laws/guidelines for rating of waste management (eg. Solid Waste Management Rules,
4 Plastic Waste Management Rules, Bio-medical Waste Management Rules, Electronic Waste Management Rules, Hazardous Waste
Management Rules, Fly Ash Utilization Policy, EPR Guidelines etc.)
ERPs should consider India specific standards/laws/guidelines for rating of Chemical safety (eg. Ban on single use plastics, ban on 27
5
agri-chemicals etc.)
Page 51 of 68
Guidance
ERPs should consider India specific standards/ laws/guidelines for rating of Effluent/Wastewater (eg. Zero Liquid Discharge policy,
6
Common Effluent Treatment Plants related provisions etc.)
ERPs should consider India specific standards/laws/guidelines for rating of Water (eg. Areas notified by the Central Ground Water Board
7
(CGWB) as over exploited or critical area, implications of Water Act, Water Cess Act etc.)
8 All intensity ratios should be factored in after adjusting for PPP
Page 52 of 68
Annexure 4
Financial sector regulators/ authorities
1. Securities and Exchange Board of India
2. Reserve Bank of India
3. Insurance Regulatory and Development Authority of India
4. Pension Fund Regulatory and Development Authority
5. International Financial Services Centre Authority 10
10 Circular No. SEBI/HO/DDHS/DDHS-PoD-3/P/CIR/2025/103 dated July 19, 2024
Page 53 of 68
Annexure 511
Standard Format for Rated Entity / Issuer’s Comments on the Rating Report –
For ERPs following Subscriber Pays business model
Subject: Comments on the Rating Report for [Name of the Rated Entity /
Instrument] Reference:
1. Date of Rating Rationale
2. Rating assigned: [Insert Rating] Specific Comments on the ESG Rating
Rationale (only in case the rated entity wants a clarification on the Rating
Report shared including any aspect pertaining to the ESG Rating
assigned by the ERP):
3. Specify the points or data (as mentioned in the ESG Rating Rationale
shared by the ERP) where the rated entity/ issuer seeks clarification or
differs in opinion. Provide data or reasoning to substantiate these
concerns (provide public link to this data).
4. A tabulated format as shown below may also be used by the rated entity:
Name of Points to be Link for public
Company considered for document/ disclosure
appeal
Authorized Signatory
[Name]
[Designation]
[Contact Information]
11 Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 dated April 29, 2025
Page 54 of 68
Standards for Clarifications to be provided by the ERP to the rated entity
To maintain transparency while safeguarding the ERP’s intellectual property, the following standards will
govern the nature and scope of clarifications provided to the rated entity in response to their comments
on the rating rationale:
1. Purpose
The ERP will address valid concerns and ensure that the rating process is transparent and
comprehensible. Proprietary models, algorithms, and benchmark datasets used in the rating process will
not be disclosed. Only information that is relevant and material to the specific rating will be shared.
Further, for any queries/ information sought over and above what isalready shared in the rating rationale
will be addressed by the ERP on a best effort basis.
As per Para 11 of SEBI Master Circular for ERPs, the ESG Rating Rationale to be shared with the rated
entity shall contain the following details -
i. Current ESG Rating along with any changes from previous evaluation and last review date
ii. Provide key factors driving the rating, including reasons for change in the rating, wherever
applicable. This should include both qualitative and quantitative factors considered while arriving
at the ESG Rating. It could also cover the following:
• Pillar-wise E, S and G scores including pillar-wise weights
• Rating sensitivity factors
• Any material controversies or regulatory lapses wherever applicable
• Link to the ESG Rating methodology or criteria as disclosed on the website
2. Scope of Clarifications pertaining to:
• Rating Rationale: Source of data use (Appropriately, safeguarding proprietary nature of
methodology, benchmarks and criteria)
• Methodology and Criteria Application: Reference to the published methodology and criteria
document on ERP website.
3. Format of Response: Provide a structured, written response addressing concerns raised by the rated
entity
4. Confidentiality: The ERP following a subscriber-pay model will not disclose:
• Details of proprietary rating models, algorithms, or weighting mechanisms
• Internal deliberations or communications during the rating process
• Benchmarks, Peer data or comparisons that could compromise confidentiality
Further, it to be noted that the ERPs will endeavour to address the queries raised by rated entities
on a best effort basis, while maintaining confidentiality of the rating process and methodology.
5. Timeline to respond (Applicable to ERPs following subscriber-pays business model):
The rated entity shall respond with a single consolidated response within two working days
from the date of receipt of rating rationale. This response should be addressed to the specific
email ID, as disclosed by the ERP on its website.
Page 55 of 68
Annexure 6
Format for Yearly ESG Rating Summary Sheet
S.
Parameter No. of ratings
No.
1. New Ratings
2. Upgrades
3. Downgrades
4. Change in Ratings assigned post request of
review/appeal by Issuer in
surveillance cases
a. Ratings wherein request of review/appeal by the
Issuer
b. Rating that have undergone revision post request
of review/appeal by Issuer
5. Ratings Withdrawn
6. Rating Distribution for outstanding
ratings as on 31st March
a 100-90
b 89-80
c 79-70
d 69-60
e
59-50
f
49-40
g 39-30
h
29-20
i
19-10
j
9-0
Page 56 of 68
Annexure 7
Details of new ESG ratings assigned during year
New Ratings assigned between Apr – Mar
S. Nam Sector Securities Listing Whether Whether Rating Final
N e of Type, if Status the issuer review/appeal assigned Rating
o the applicable (Listed/ requested of the rating prior to Assign
Issu Propose for a was granted request ed
er d to be review/ by ERP. for review/
listed ) appeal of appeal by
rating? the issuer
Page 57 of 68
Annexure 8
Movement* of Each ESG rating
Upgrades
Rating Upgrades between Apr – Mar
S. Nam Sect Security Listing Ratin Ratin Date Differen Trigger
N e of or Type, if Status g g of ce in Event
o the applicab (Listed prior post Rating Ratings
issue le / to revisi Ration
r Propos revisi on ale
ed to on for
be Rating
listed) upgrad
e
Downgrades
Rating Upgrades between Apr– March
S Nam Sect Securit Listing Ratin Ratin Date of Differen Trigger
. e of or y Type, Status g g Rating ce in Event
N the if (Listed prior post Rational Ratings
o issue applica / to Revisi e
r ble Propos Revisi on for
ed to on Rating
be downgra
listed) ded
*Will cover only rating changes. Reaffirmations shall be excluded
Page 58 of 68
Annexure 9
History of all outstanding ESG ratings
History of ESG rating of all Outstanding Securities
S.N Name Sec Type of Listing Initial Date Rating Date Rating Date … Current
o of the tor security Status Rating of after of 1st after of 2nd Outstanding
Issuer , if (Listed/ Initial 1st Revisi 2nd Revisi Rating
applica /Propos Rating Revisi on Revisi on
ble ed to be on on
listed)
Page 59 of 68
Annexure 10
Average one-year transition rates for ESG ratings for the last 3-Financial Year
Period
Rating 100-90 89-80 79-70 69-60 59-50 49-40 39-30 29-20 19-10 9-0
Category
100-90
89-80
79-70
69-60
59-50
49-40
39-30
29-20
19-10
9-0
Note: The left-hand column identifies ratings outstanding at the beginning of the year.
Each row provides information on the migration pattern of those ratings by end of the
year.
Page 60 of 68
Annexure 11
PRINCIPLES FOR OUTSOURCING FOR ERPs
1. An ERP seeking to outsource activities shall have in place a
comprehensive policy to guide the assessment of whether and how
those activities can be appropriately outsourced. The Board / partners
(as the case may be) {hereinafter referred to as the “the Board”} of the
ERP shall have the responsibility for the outsourcing policy and related
overall responsibility for activities undertaken under that policy.
1.1 The policy shall cover activities or the nature of activities that can be
outsourced, the authorities who can approve outsourcing of such
activities, and the selection of third party to whom it can be outsourced.
For example, an activity shall not be outsourced if it would impair the
supervisory authority’s right to assess, or its ability to supervise the
business of the ERP. The policy shall be based on an evaluation of risk
concentrations, limits on the acceptable overall level of outsourced
activities, risks arising from outsourcing multiple activities to the same
entity, etc.
1.2 The Board shall mandate a regular review of outsourcing policy for such
activities in the wake of changing business environment. It shall also have
overall responsibility for ensuring that all ongoing outsourcing decisions
taken by the ERP and the activities undertaken by the third-party, are in
keeping with its outsourcing policy.
2. The ERP shall establish a comprehensive outsourcing risk
management programme to address the outsourced activities and the
relationship with the third party.
2.1 The ERP shall make an assessment of outsourcing risk which depends
Page 61 of 68
on several factors, including the scope and materiality of the outsourced
activity, etc. The factors that could help in considering materiality in a risk
management programme include-
a) The impact of failure of a third party to adequately perform the activity
on the financial, reputational and operational performance of the ERP
and on the investors / clients;
b) Ability of the ERP to cope up with the work, in case of non-
performance or failure by a third party by having suitable back-up
arrangements;
c) Regulatory status of the third party, including its fitness and probity status;
d) Situations involving conflict of interest between the ERP and the third
party and the measures put in place by the ERP to address such
potential conflicts, etc.
2.2 While there shall not be any prohibition on a group entity / associate of
the ERP to act as the third party, systems shall be put in place to have an
arm’s length distance between the ERP and the third party in terms of
infrastructure, manpower, decision-making, record keeping, etc. for
avoidance of potential conflict of interests. Necessary disclosures in this
regard shall be made as part of the contractual agreement. It shall be kept
in mind that the risk management practices expected to be adopted by
the ERP while outsourcing to a related party or an associate would be
identical to those followed while outsourcing to an unrelated party.
2.3 The records relating to all activities outsourced shall be preserved
centrally so that the same is readily accessible for review by the Board of
the ERP and / or its senior management, as and when needed. Such
records shall be regularly updated and may also form part of the
corporate governance review by the management of the ERP.
2.4 Regular reviews by internal or external auditors of the outsourcing
policies, risk management system and requirements of the regulator shall
Page 62 of 68
be mandated by the Board wherever felt necessary. The ERP shall review
the financial and operational capabilities of the third party in order to
assess its ability to continue to meet its outsourcing obligations.
3. The ERP shall ensure that outsourcing arrangements neither diminish
its ability to fulfill its obligations to customers and regulators, nor
impede effective supervision by the regulators.
3.1 The ERP shall be fully liable and accountable for the activities that are
being outsourced to the same extent as if the service were provided in-
house.
3.2 Outsourcing arrangements shall not affect the rights of an investor or
client against the ERP in any manner. The ERP shall be liable to the
investors for the loss incurred by them due to the failure of the third party
and also be responsible for redressal of the grievances received from
investors arising out of activities rendered by the third party.
3.3 The facilities / premises / data that are involved in carrying out the
outsourced activity by the service provider shall be deemed to be those
of the registered ERP. The ERP itself and Regulator or the persons
authorized by it shall have the right to access the same at any point of
time.
3.4 Outsourcing arrangements shall not impair the ability of SEBI/SRO or
auditors to exercise its regulatory responsibilities such as
supervision/inspection of the ERP.
4. The ERP shall conduct appropriate due diligence in selecting the third
party and in monitoring of its performance.
4.1 It is important that the ERP exercises due care, skill, and diligence in the
selection of the third party to ensure that the third party has the ability and
capacity to undertake the provision of the service effectively.
Page 63 of 68
4.2 The due diligence undertaken by an ERP shall include assessment of:
a) third party’s resources and capabilities, including financial
soundness, to perform the outsourcing work within the timelines fixed;
b) compatibility of the practices and systems of the third party with the
ERP’s requirements and objectives;
c) market feedback of the prospective third party’s business reputation
and track record of their services rendered in the past;
d) level of concentration of the outsourced arrangements with a single
third party; and
e) the environment of the foreign country where the third party is located.
5. Outsourcing relationships shall be governed by written contracts /
agreements / terms and conditions (as deemed appropriate)
{hereinafter referred to as “contract”} that clearly describe all material
aspects of the outsourcing arrangement, including the rights,
responsibilities and expectations of the parties to the contract, client
confidentiality issues, termination procedures, etc.
5.1 Outsourcing arrangements shall be governed by a clearly defined and
legally binding written contract between the ERP and each of the third
parties, the nature and detail of which shall be appropriate to the materiality
of the outsourced activity in relation to the ongoing business of the ERP.
5.2 Care shall be taken to ensure that the outsourcing contract:
a) clearly defines what activities are going to be outsourced, including
appropriate service and performance levels;
b) provides for mutual rights, obligations and responsibilities of the ERP
and the third party, including indemnity by the parties;
c) provides for the liability of the third party to the ERP for unsatisfactory
performance/other breach of the contract
Page 64 of 68
d) provides for the continuous monitoring and assessment by the ERP
of the third party so that any necessary corrective measures can be
taken up immediately, i.e., the contract shall enable the ERP to retain
an appropriate level of control over the outsourcing and the right to
intervene with appropriate measures to meet legal and regulatory
obligations;
e) includes, where necessary, conditions of sub-contracting by the third-
party, i.e. the contract shall enable ERP to maintain a similar control
over the risks when a third party outsources to further third parties as
in the original direct outsourcing;
f) has unambiguous confidentiality clauses to ensure protection of
proprietary and customer data during the tenure of the contract and
also after the expiry of the contract;
g) specifies the responsibilities of the third party with respect to the IT
security and contingency plans, insurance cover, business continuity
and disaster recovery plans, force majeure clause, etc.;
h) provides for preservation of the documents and data by third party ;
i) provides for the mechanisms to resolve disputes arising from
implementation of the outsourcing contract;
j) provides for termination of the contract, termination rights, transfer of
information and exit strategies;
k) addresses additional issues arising from country risks and potential
obstacles in exercising oversight and management
of the arrangements when ERP outsources its activities to
foreign third party. For example, the contract shall include choice-of-
law provisions and agreement covenants and jurisdictional covenants
that provide for adjudication of disputes between the parties under the
laws of a specific jurisdiction;
l) neither prevents nor impedes the ERP from meeting its respective
regulatory obligations, nor the regulator from exercising its regulatory
powers; and
m) provides for the ERP and /or the regulator or the persons authorized
by it to have the ability to inspect, access all books, records and
Page 65 of 68
information relevant to the outsourced activity with the third party.
6. The ERP and its third parties shall establish and maintain contingency
plans, including a plan for disaster recovery and periodic testing of
backup facilities.
6.1 Specific contingency plans shall be separately developed for each
outsourcing arrangement, as is done in individual business lines.
6.2 ERP shall take appropriate steps to assess and address the potential
consequence of a business disruption or other problems at the third party
level. Notably, it shall consider contingency plans at the third party; co-
ordination of contingency plans at both the ERP and the third party; and
contingency plans of the ERP in the event of non-performance by the third
party.
6.3 To ensure business continuity, robust information technology security is
a necessity. A breakdown in the IT capacity may impair the ability of the
ERP to fulfill its obligations to other market participants/clients/regulators
and could undermine the privacy interests of its customers, harm the
ERP’s reputation, and may ultimately impact on its overall operational risk
profile. Intermediaries shall, therefore, seek to ensure that third party
maintains appropriate IT security and robust disaster recovery
capabilities.
6.4 Periodic tests of the critical security procedures and systems and review
of the backup facilities shall be undertaken by the ERP to confirm the
adequacy of the third party’s systems.
7. The ERP shall take appropriate steps to require that third parties
protect confidential information of both the ERP and its customers from
intentional or inadvertent disclosure to unauthorized persons.
Page 66 of 68
7.1 ERP that engages in outsourcing is expected to take appropriate steps to
protect its proprietary and confidential customer information and ensure
that it is not misused or misappropriated.
7.2 The ERP shall prevail upon the third party to ensure that the employees
of the third party have limited access to the data handled and only on a
“need to know” basis and the third party shall have adequate checks and
balances to ensure the same.
7.3 In cases where the third party is providing similar services to multiple
entities, the ERP shall ensure that adequate care is taken by the third
party to build safeguards for data security and confidentiality.
8. Potential risks posed where the outsourced activities of multiple
intermediaries are concentrated with a limited number of third parties.
8.1 In instances, where the third party acts as an outsourcing agent for
multiple intermediaries, it is the duty of the third party and the ERP to
ensure that strong safeguards are put in place so that there is no co-
mingling of information/documents, records and asset
Page 67 of 68
Appendix: List of circulars superseded by Master Circular
S. No. Reference Number of Circular Name of Circular
1. SEBI/HO/DDHS/POD3/P/CIR/2024/45 dated Master Circular for ESG Rating Providers
May 16, 2024
2. SEBI/HO/DDHS/DDHS-POD3/P/CIR/2024/103 Enabling ESG Rating Providers (ERPs) to
dated July 19, 2024 undertake ESG rating activities under IFSCA
3. SEBI/HO/DDHS/DDHS-PoD-3/P/CIR/2025/007 Timeline for Review of ESG Rating pursuant
dated January 17, 2025 to occurrence of ‘Material Events’
4. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/59 Clarificatory and Procedural changes to aid
dated April 29, 2025 and strengthen ESG Rating Providers (ERPs)
Page 68 of 68