The Securities and Exchange Board of India (SEBI) has launched a formal review of the regulatory framework governing ESG Rating Providers (ERPs), marking a significant step in strengthening India’s sustainability ratings infrastructure. The move follows feedback from market participants and stakeholders on the adequacy and effectiveness of the existing rules.

The review stems from SEBI’s existing “Master Circular for ESG Rating Providers,” originally introduced in 2021 to incorporate ESG ratings into India’s financial oversight mechanisms. As part of the review, SEBI has constituted a working group comprising issuers, investors, analytics users, domestic and global ESG rating providers, analysts, legal experts and academics.

The working group’s mandate is to comprehensively evaluate the current regulatory framework, assess suggestions from market participants, and recommend measures to enhance transparency, reliability and confidence in ESG ratings. It will also examine international regulatory developments in ESG ratings and identify areas for alignment with global best practices.

SEBI’s initiative aligns with broader global regulatory trends aimed at reinforcing the credibility of sustainability metrics and ensuring that ESG ratings serve as a robust tool for investors and corporates alike.