SEBI/HO/DDHS/DDHS -PoD -2/P/CIR/2025/59

1 · 1. Withdrawal of ESG ratings

1 · 1.1. Para 13.1 of the Master Circular provides as under:

1 · 1.2. In this regard, considering the challenges faced by ERPs and in order to align the requirements with the withdrawal norms laid down for credit rating, in addition to the cases specified in Regulation 28M of the SEBI (Credit Rating Agecies) Regulations, 1999 , the following is being specified:

1 · 2. Disclosure of Rating Rationale on the website of ERP

1 · 2.1. Para 11.3 of the Master Circular specifies the minimum disclosures to be made in the ESG Rating Rationale/ ESG Report by all ERPs. Further, Para 20.2 of the Master Circular, inter alia, provides for continuous disclosure of Rating Rationales and Rating Reports on the ERP's website .

1 · 2.2. It is clarified that ERPs following a Subscriber-Pays business model may share the detailed Rating Rationales/ Rating Reports, as specified in Para 11.3 of the Master Circular, only with their subscribers and may not disclose the same on their websites. However, ERPs following a Subscriber-Pays business model shall disclose the ESG ratings assigned on their website in the following format:

1 · 2.3. The rated entity/ issuer may provide its comments on the ESG rating report/ ratig rationale to the ERP in the standardised format as devised by the ESG Rating Provider Association in consultation with SEBI . Further, the ESG Rating Provider Association, in consultation with SEBI, has framed the standards for the clarification to be provided by the ERP to the rated entity, balancing the minimum information that is to be provided while maintaining confidentiality of intellectual property of ERPs. The said format/ standards are enclosed as Annexure A . ERPs following subscriber-pays business model shall ensure that the said format/ standards are disclosed on their websites and are shared with the rated issuer while sharing the ESG rating report/ rationale with the issuer.

1 · 3. Disclosure of Rating Rationale on the website of Stock Exchange(s)

1 · 3.1. For ESG ratings of an issuer/ entity, the stock exchange where such issuer is listed shall prominently disclose the ESG rating on its website under a separate tab/ section on the listed company's page.

1 · 3.2. For ESG ratings of a debt security, the stock exchange where the security is listed shall prominently disclose the ESG rating on its website under a separate tab/ section on the listed security's page.

1 · 3.3. The format for disclosure of ESG ratings, as specified in Para 1.3.1. and 1.3 . 2 ., shall be as under:

1 · 4. Internal Audit for ERPs

1 · 4.1. Chapter IV of the Master Circular provides the requirements related to Internal Audit of ERPs. Considering the challenges faced by Category II ERPs in the initial years of operation, the requirement to conduct internal audit shall become effective for Category-II ERPs after a period of two years from the date of issuance of this Circular .

1 · 4.2. In order to provide all ERPs with a larger pool of eligible professionals with the relevant experience/ qualifications for conducting the internal audit, it has been decided to include Cost Accountant (ACMA/ FCMA) and Diploma in Information System Security Audit (DISSA) qualifications from the Institute of Cost Accounts of India (ICMAI) to the audit team. Accordingly, Para 23.1.3 of the Master Circular stands modified as under:

1 · 5. Governance Norms of ERPs

1 · 5.1. Para 15.3 of the Master Circular, inter alia, provides for constitution of ESG Ratings Sub-Committee and Nomination and Remuneration Committee (NRC) by ERPs. Considering the challenges faced by Category II ERPs in the initial years of operation, the requirement for constitution of an ESG Ratings SubCommittee and NRC shall become effective for Category-II ERPs after a period of two years from the date of issuance of this Circular. Until the said time, the

1 · Purpose

2 · Scope of Clarifications pertaining to: