SEBI Constitutes Working Group to Review ESG Rating Providers (ERPs) Regulatory Framework

Description

SEBI has formed a Working Group to review and improve the regulatory framework for ESG Rating Providers, incorporating feedback from market participants and stakeholders.

Summary

SEBI has constituted a Working Group to conduct a comprehensive review of the regulatory framework governing ESG Rating Providers (ERPs). The initiative is driven by feedback from market participants and stakeholders. The group comprises representatives from issuers, investors, ESG rating users, domestic and global ERPs, ESG analysts, legal experts, and academia.

Key Points

• SEBI formed a multi-stakeholder Working Group to review the ERP regulatory framework (PR No. 13/2026).
• The group includes issuers, investors/ESG rating users, domestic ERPs, global ERPs, ESG analysts, legal experts, and academia.
• The review is prompted by feedback received from market participants on the existing framework.
• The Working Group will submit a report with findings and policy/regulatory recommendations to SEBI.

Regulatory Changes

No immediate regulatory changes are introduced by this circular. The Working Group’s mandate is to review the existing framework and recommend changes. Potential future changes may cover transparency standards, reliability of ESG ratings, and alignment with global best practices.

Compliance Requirements

• No immediate compliance obligations for market participants.
• ESG Rating Providers, issuers, and investors should monitor the Working Group’s findings and be prepared for potential framework changes upon submission of the report.

Important Dates

• February 18, 2026: SEBI announced the constitution of the Working Group.
• No deadline specified for the Working Group’s report submission.

Impact Assessment

The circular signals SEBI’s intent to evolve and potentially tighten the ESG rating ecosystem in India. ESG Rating Providers (both domestic and global) operating in India may face revised compliance obligations once recommendations are implemented. Issuers relying on ESG ratings for fundraising or disclosure purposes and institutional investors using ESG ratings in their investment process should track this development closely. The emphasis on global best practices suggests possible harmonization with international ESG regulatory standards.

Impact Justification

This is a policy review initiative rather than an immediate regulatory change. Its impact will be realized when the Working Group submits recommendations that may reshape ESG rating rules for issuers and investors.