Environmental, Social and Governance (ESG) - Principles and Practice · Sustainability Audit, ESG Rating and Emerging Mandates from Government and Regulators

SEBI Regulation of ESG Rating Providers (ERPs)

Updated 11 October 2026 · Fact-checked

SEBI regulates ESG Rating Providers (ERPs) through the SEBI (Credit Rating Agencies) Regulations, 1999, as amended in 2023, and related circulars. An ERP must be registered, meet eligibility and governance conditions, offer products such as the Core ESG Rating, and disclose its methodology and conflicts. In answers, state the provision, apply it to the facts, then conclude.

Understand SEBI Regulation of ESG Rating Providers

An ESG rating is an opinion on how well a company manages environmental, social and governance risks and opportunities. Investors, lenders and issuers use it. Before 2023 anyone could sell an ESG rating in India. There was no registration, no common standard and no check on conflicts of interest. That created doubt about whether ratings were comparable or reliable.

SEBI fixed this in 2023. It amended the SEBI (Credit Rating Agencies) Regulations, 1999 to bring in a new class of intermediary, the ESG Rating Provider (ERP). It then issued a circular setting out how ERPs must work. The idea is simple: if an entity sells ESG ratings to the market, it should be registered with SEBI, follow fixed norms and be open to inspection.

The framework has four parts. First, registration: you cannot act as an ERP without a SEBI certificate of registration, and the applicant must meet conditions on legal form, net worth, fit and proper status and governance. Second, rating products: the circular lists the products an ERP may offer. The central one is the Core ESG Rating, which is built on the BRSR Core disclosures of listed entities, with assurance. ERPs may also offer broader ESG ratings and scores. Third, disclosure and conduct norms: an ERP must publish its methodology, data sources and limitations, and must manage conflicts of interest. Fourth, supervision: SEBI can inspect, and can act for breach of the regulations.

The second half of this topic is ESG debt securities. These are debt instruments whose proceeds, or whose terms, are tied to environmental or social outcomes. SEBI regulates them inside the framework for issue and listing of non-convertible securities. The categories are green debt securities, social bonds, sustainability bonds and sustainability-linked bonds. The framework has since been widened, so check the latest SEBI text for added categories. The shared logic is that the issuer must disclose what the money is for, how projects qualify, who reviews the claim, and how the use of proceeds is reported each year. This protects investors from greenwashing.

Keep the purpose in mind for any answer: reliable, comparable, transparent ESG information for the securities market. The details of the framework follow from that purpose.

Key rules to remember

Source of the ERP framework: SEBI (Credit Rating Agencies) Regulations, 1999, as amended in 2023 + SEBI circular on ESG Rating and ESG Rating Providers (2023); Name both the regulations and the circular. The regulations give the legal power. The circular gives the operating detail.
Registration rule: No person may act as an ERP without a SEBI certificate of registration; The applicant must meet conditions on legal form, net worth, fit and proper status and governance. The framework set a minimum net worth of ₹5 crore at introduction; check the current text before quoting it.
Core ESG Rating: Core ESG Rating = rating built on BRSR Core disclosures, with assurance; This is the anchor product. It links the rating framework to the BRSR Core mandate for listed entities.
ERP disclosure norms: Methodology + data sources + limitations + conflict-of-interest management = public disclosure by the ERP; Say that the ERP must publish these and keep them current. Do not claim exact numeric thresholds you are not sure of.
Categories of ESG debt securities: Green debt securities | Social bonds | Sustainability bonds | Sustainability-linked bonds; Later amendments widened the list. For each, remember the disclosure duties: use of proceeds, project evaluation process, reviewer or certifier, and annual reporting.
Anti-greenwashing principle: Claim made at issue = disclosed objective + verifiable use of proceeds + continuing report; Use this as the conclusion line in case answers on ESG debt securities.

How to solve SEBI Regulation of ESG Rating Providers questions

Use this order for any theory or case question on ERPs or ESG debt securities. It follows the paper's pattern of provision, analysis, conclusion.

1Identify the limb being tested: registration of an ERP, rating products, disclosure and conduct norms, SEBI supervision, or ESG debt securities.
2State the source in one line: the SEBI (Credit Rating Agencies) Regulations, 1999 as amended in 2023 and the 2023 circular for ERPs, or the non-convertible securities framework for ESG debt securities.
3State the rule in plain words with its condition. For example, an ERP needs a certificate of registration before it offers ratings.
4Apply the rule to the facts. Pick out who the person is, what product it sells, who pays, and what has or has not been disclosed.
5Name the compliance or drafting point. This could be the website disclosure of methodology, the conflict policy, the use-of-proceeds report or the reviewer's certificate.
6Conclude clearly: compliant or not, and what the entity should do next.
7Link to the wider purpose in one closing line: reliable and comparable ESG information, and prevention of greenwashing.

Quickest way: Four-box recall: Who, What, Disclose, Check

When to use it: Use it when you have under ten minutes for a short note or a case question on this topic.

Who: the ERP must be SEBI registered. Write the source in one line.
What: list the products, with Core ESG Rating first and linked to BRSR Core.
Disclose: methodology, data sources, limitations and conflicts, kept on the ERP's website.
Check: SEBI inspection and action. For debt securities, add use of proceeds, reviewer and annual reporting.
Finish with one line on investor protection and greenwashing.

Common mistakes in SEBI Regulation of ESG Rating Providers

Saying ESG ratings are regulated under the Companies Act, 2013.
Students link all ESG topics to company law because BRSR sits in the listing framework and Board's report.
Fix: ERPs are regulated by SEBI under the amended Credit Rating Agencies Regulations, 1999. Companies Act provisions apply to the rated company, not to the ERP.
Treating an ERP as the same thing as a credit rating agency.
The rules sit in the same regulations, so the two seem identical.
Fix: A credit rating agency rates credit risk. An ERP rates ESG performance. They need separate registration for their separate activities, even if one group houses both.
Writing the Core ESG Rating as a general opinion on any ESG data.
Students do not connect it to BRSR Core.
Fix: Write that the Core ESG Rating is based on BRSR Core disclosures with assurance. Then name the link between the rating and the BRSR Core mandate.
Quoting exact numbers, dates or circular numbers from memory.
Students try to look precise.
Fix: Quote only figures you are certain of. A correct rule stated in words earns marks. A wrong number can lose them.
Listing ESG debt securities without the disclosure duties.
Students memorise the names of green, social, sustainability and sustainability-linked bonds and stop there.
Fix: For each category, add what the issuer must disclose: objective, use of proceeds, project selection process, reviewer or certifier, and annual reporting.
Ignoring conflicts of interest in case answers.
Students focus on registration and forget conduct norms.
Fix: If the facts show the ERP is paid by the rated entity or has a related business, discuss the conflict policy and disclosure, and say how the ERP should handle it.

Worked examples

Example 1

Explain the framework laid down by SEBI for the registration and regulation of ESG Rating Providers.

Show the solution

Source: SEBI amended the SEBI (Credit Rating Agencies) Regulations, 1999 in 2023 to create the category of ESG Rating Provider, and followed it with a circular on ESG ratings and ERPs.
Registration: no person can act as an ERP without a SEBI certificate of registration. The applicant must meet conditions on legal form, net worth, fit and proper status and governance.
Products: the circular sets out the ratings an ERP may offer. The Core ESG Rating, based on BRSR Core disclosures with assurance, is the main one. Broader ESG ratings and scores can also be offered.
Disclosure and conduct: the ERP must publish its methodology, data sources and limitations. It must manage conflicts of interest and follow its stated process consistently.
Supervision: SEBI can inspect an ERP and take action under the regulations for breach.
Purpose: the framework gives investors reliable and comparable ESG information and reduces the risk of misleading ratings.

Answer: SEBI requires ERPs to be registered under the amended Credit Rating Agencies Regulations, 1999. They must offer defined products led by the Core ESG Rating on BRSR Core, disclose methodology, data sources and conflicts, and remain open to SEBI inspection. The aim is reliable, comparable ESG ratings.

Example 2

Navkar Power Ltd., a listed company, plans to raise funds by issuing debt securities for a solar park and wants to label them green. It says it will decide on the exact projects after allotment and will report only if investors ask. Advise the company.

Show the solution

Provision: green debt securities fall in SEBI's ESG debt securities framework under the non-convertible securities regime. The framework is built on disclosure of objective and use of proceeds, and on continuing reporting.
Analysis on projects: the company cannot leave projects open until after allotment. It must disclose the objective and the process for evaluating and selecting eligible projects in the offer document. A solar park is the kind of project that normally qualifies, but the document must say so and explain how it qualifies.
Analysis on reporting: reporting is not optional on request. The issuer must report on the use of proceeds on a continuing basis, usually annually, for as long as the securities are outstanding or until the proceeds are used.
Analysis on credibility: the framework expects an independent reviewer or certifier to support the green claim. The company should arrange this and disclose it.
Conclusion: the plan as stated would not satisfy the framework and risks being seen as greenwashing.

Answer: Navkar Power should name the objective and the project selection process in the offer document, appoint an independent reviewer, and commit to regular reporting on use of proceeds. Without these, it should not label the issue green.

Exam tips

Open every answer with the source: the amended Credit Rating Agencies Regulations, 1999 and the 2023 circular. This shows the examiner you know the legal basis.
Link the Core ESG Rating to BRSR Core in the first few lines. It is the single most testable connection in this topic.
For ESG debt securities, always give the four disclosure duties: objective, use of proceeds, reviewer and ongoing reporting.
In case questions, check whether the facts show a conflict of interest, a missing registration or a missing disclosure, and say so by name.
Add the words greenwashing and investor protection in the conclusion. Do not fill space with section numbers or figures you cannot confirm.

Practice questions from Sustainability Audit, ESG Rating and Emerging Mandates from Government and Regulators

SEBI Regulation of ESG Rating Providers in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

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SEBI Regulation of ESG Rating Providers: frequently asked questions

What is an ESG Rating Provider under SEBI rules?

An ESG Rating Provider is a person registered with SEBI to provide ESG ratings. SEBI introduced the category in 2023 by amending the Credit Rating Agencies Regulations, 1999. Without registration, a person cannot act as an ERP.

What is the Core ESG Rating?

It is the ESG rating product based on the BRSR Core disclosures of listed entities, which come with assurance. It links the rating framework to the BRSR Core mandate. In exams, mention both the link and the purpose of comparability.

How does an entity register as an ESG Rating Provider with SEBI?

It applies to SEBI under the Credit Rating Agencies Regulations, 1999 and must meet the conditions on legal form, net worth, fit and proper status and governance. SEBI considers the application and grants a certificate of registration. For the exact form, fee and current net worth, check the latest SEBI text.

What are ESG debt securities?

They are debt instruments whose proceeds or terms are tied to environmental or social goals. The framework covers green debt securities, social bonds, sustainability bonds and sustainability-linked bonds. Issuers must disclose objectives, use of proceeds, and report on it regularly.

Do I need to remember circular numbers and dates for the exam?

No. The paper is written and case-based, so marks go to the rule, the analysis and the conclusion. Remember the source regulations, the products, the disclosure norms and the supervision powers.