SEBI, by way of its Notification dated July 03, 2023, has amended the SEBI (Credit Rating Agencies) Regulations, 1999 to introduce a framework (‘Framework’) for regulation and accreditation of Environmental, Social and Governance (‘ESG’) ratings providers i.e., rating providers who are engaged in the business of rating products 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, which are issued using a defined ranking system of rating categories (‘ESG Rating Provider’).

A person who proposes to act as an ESG Rating Provider is now required to obtain a certificate of registration from SEBI. Existing ESG Rating Providers can continue to operate without registration for a period of six months from the date of the Notification or any other period specified by SEBI, or until the disposal of their application for registration (if such an application has been made within the specified time).

The Framework inter alia sets out the eligibility criteria for applicants to register as an ESG Rating Provider, categories of ESG Rating Providers, conditions of registration, code of conduct, rating procedure, disclosure requirements etc.