SEBI Issues Updated Master Circular for ‘ESG Rating Providers’

Master Circular No. SEBI/HO/DDHS-PoD-2/P/CIR/2025/100; Dated: 11.07.2025

The Securities and Exchange Board of India (SEBI) has issued a revised Master Circular for Environmental, Social and Governance (ESG) Rating Providers (ERPs). The new circular consolidates all relevant regulatory provisions and aims to enhance transparency, consistency, and accountability in ESG rating practices across the Indian market.

1. Purpose of the Master Circular

The objective of this master circular is to provide a comprehensive, single-point reference for all procedural and disclosure requirements applicable to ERPs. It is expected to improve regulatory clarity and aid better compliance by:

• Organising all existing directions in one place
• Eliminating redundancy and confusion from multiple past circulars
• Creating uniform standards for ESG ratings

2. Scope of Coverage

The circular lays down detailed guidelines on the following key aspects:

2.1 Registration and Approval

• Mandatory registration process for entities wishing to operate as ESG Rating Providers
• Criteria for SEBI’s approval, including eligibility conditions, fit and proper norms, and capital requirements

2.2 Surrender of Registration

• Step-by-step procedure for voluntary surrender of ERP registration
• Requirements for data retention, stakeholder intimation, and transition handling

2.3 Rating Operations

• Framework governing the methodology, process, and use of data in ESG rating
• Responsibilities related to maintaining objectivity, independence, and analytical rigor

2.4 Reporting and Disclosures

• Periodic disclosures to be made by ERPs on their rating models, data sources, rating scale, and client details
• Norms for public dissemination of ESG ratings and rationale

2.5 Internal Audit and Governance

• Requirement of conducting regular internal audits
• Governance standards to ensure transparency, risk management, and compliance

2.6 Miscellaneous Guidelines

• Guidelines related to record keeping, conflict of interest policies, and stakeholder grievance redressal mechanisms

3. Who Should Refer to the Circular?

This master circular is relevant for:

• Existing and prospective ESG Rating Providers
• Listed companies and investors using ESG ratings
• ESG consultants, market analysts, and compliance officers
• Regulatory and financial institutions relying on ESG data

4. Conclusion

SEBI’s updated master circular for ESG Rating Providers reflects its continued efforts to bring uniformity and integrity to ESG disclosures and ratings in India. Stakeholders are advised to align their practices with the updated framework to ensure compliance and maintain investor confidence.

Click Here To Read The Full Circular