Master Circular for ESG Rating Providers
Summary
This section establishes the regulatory framework for ESG Rating Providers under the SEBI (Credit Rating Agencies) Regulations, 1999. It mandates compliance with the Master Circular and requires ERPs to maintain necessary systems and infrastructure for implementation. The circular outlines the online registration mechanism via the SEBI Intermediary Portal while providing interim procedures for hard copy submissions. This section mandates that registered Entity Rating Providers (ERPs) obtain prior SEBI approval for any change in control. It outlines the application process, required disclosures, and validity periods for such approvals, including specific procedures for schemes of arrangement involving the NCLT. Additionally, it clarifies regulations regarding the transfer of business between intermediaries and prescribes guidelines for the orderly migration of ESG ratings during suspension, cancellation, or surrender of registration. This section outlines the post-cancellation, suspension, and surrender obligations for Environmental Rating Providers (ERPs), including cooperation with SEBI and record retention. It defines ESG ratings and mandates specific rating products such as Core
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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.
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.
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.
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.
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.
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.
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.
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.
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.
Fees and other charges payable to SEBI are subject to Goods and Services Tax (GST) that is at present 18%.
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.
An ERP shall make an application to SEBI for prior approval through the SEBI Intermediary Portal; however, till operationalisation, applications may be submitted in hard copy and soft copy.
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Source: SecMarx — Master Circular for ESG Rating Providers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.