Current Context: The Securities and Exchange Board of India (SEBI) proposed new measures to strengthen the regulatory framework for Environmental, Social, and Governance (ESG) Rating Providers (ERPs) on February 13, 2025.
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Key proposals include:
- Withdrawal Conditions: ERPs can withdraw ratings under specific conditions based on their revenue model (subscriber-pays or issuer-pays).
- Disclosure Requirements: ERPs must share detailed rating rationales with subscribers and not publish them on their websites.
- Stock Exchange Regulations: Stock exchanges must prominently disclose ESG ratings of listed companies.
- Internal Audits: ERPs must undergo internal audits, with a phased approach for newer providers.
Question:
1. What are the two types of revenue models mentioned in SEBI’s proposal for ESG Rating Providers?
a) Equity-based and Subscription-based
b) Subscription-pays and Issuer-pays
c) Government-funded and Private-funded
d) Public-pays and Private-pays
Answer:b) SEBI proposed that ESG Rating Providers (ERPs) should classify their revenue models into subscription-pays (investors pay for ratings) and issuer-pays (companies pay for their ratings).
