Market regulator proposal to strengthen ERP structure – Market Regulator Proposal to Strengthen Erp Structure

SEBI has proposed to strengthen regulatory structure for ESG rating providers (ERPs). Its purpose is to increase transparency and accountability. The proposal mainly focuses on withdrawal of ESG ratings and ratings. In the discussion letter, SEBI has set the outline of the conditions for ERP for removing ratings under subscriber-pay and issues.

Under the subscriber-pay model, SEBI has proposed that ERP can withdraw that rating if there is no subscriber for rating. However, if the rating unit or instrument is part of the rating package (eg Nifty-50 index) with subscriber, then the rating will not be withdrawn. Also, if a rating is withdrawn then the ratings for all subscribers will be returned. Meanwhile, under the issue-pay model, the ERP withdraws up to 50 per cent of the securities or up to 50 per cent of the securities period (whatever is higher) and up to 75 per cent on the price of 75 per cent on the basis of 75 per cent on the price of the securities. Will be able to

SEBI has also proposed that the ERP adopting the subscriber-pay model should only share the wide rating and report with subscribers and not put it on its website. However, they have to disclose the ESG rating given in the format specified on their website. In addition, stock exchanges will also be asked to promote the ESG rating under a separate tab or section for listed companies and securities on their websites.

The regulator has also proposed that the internal audit and enrollment and remuneration committee (NRC) for the Category-2 ERP will be made mandatory two years after the release of the new rules. The regulator has invited public comments on these proposals till 6 March. ERP is institutions providing environment, social and governance (ESG) ratings. Last year, the market regulator made registration and ERP license compulsory for such institutions.

First Published – February 13, 2025 | 10:24 pm IST