Timeline For Review  of  ESG  Rating  Pursuant  to Occurrence  of ‘Material Developments’

Background

ESG Rating Providers [ERP’] are rating agencies registered with SEBI. ERPs provide ratings on all ESG factors of a listed entity. SEBI vide its master circular dt: May 16, 2024[1] stated that ERPs must have efficient systems to track material developments related to environmental, social and governance factors to ensure ESG ratings. Material development would be any event that may result in change of ESG profile. It was also stated that ERPs shall review ESG ratings upon occurrence of such material developments not later than 10 days of occurrence of said event. In this regard ERPs had made representation to SEBI, highlighting the operational challenges faced in undertaking review of ESG ratings for a large pool of listed companies within a period of 10 days.

Introduction

Considering the representation made by ERPs, SEBI has now issued an amendment to the master circular for ERPs dt: January 17, 2025[1]:

“ERPs shall carry out a review of the ESG ratings upon the occurrence of or announcement/ news of such material developments 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.”

SEBI has now stated that review of ESG ratings pursuant to publication of BRSR report needs to be done within a period of not later than 45 days from the date of publication of BRSR report. In all other cases ESG ratings review shall be done within a period of not later than 10 days from the occurrence of material development.  

Conclusion

Due to this ERPs would now get more time for review of ESG ratings pursuant to publication of BRSR report. It also needs to be highlighted change in ESG rating, pursuant to review of ESG ratings on publication of BRSR report, will also require disclosure to stock exchange within 24 hours after receipt of intimation from ERPs.

[1] https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-esg-rating-providers-erps-_83421.html

Para 10.1.3 page no. 20 of 60

[2] https://www.sebi.gov.in/legal/circulars/jan-2025/timeline-for-review-of-esg-rating-pursuant-to-occurrence-of-material-events-_90930.html