• India’s securities regulator has convened a multi-stakeholder working group to reassess oversight of ESG rating providers.
• The review aims to improve transparency, reliability, and investor trust in ESG ratings as capital flows into sustainable finance accelerate.
• Findings may align India’s framework with global best practices, shaping cross-border investment standards and disclosure expectations.

The Securities and Exchange Board of India (SEBI) has constituted a working group to review the regulatory framework governing ESG Rating Providers (ERPs), responding to feedback from market participants and stakeholders on the current regime.

The move reflects growing scrutiny of ESG ratings globally, where inconsistencies in methodologies and disclosure practices have raised concerns among investors, regulators, and issuers. India’s capital markets regulator is seeking to ensure that ESG ratings remain credible, decision-useful, and aligned with evolving global norms.

Broad Stakeholder Representation Signals Market-Wide Review

The working group brings together representatives from issuers, investors and ESG rating users, domestic and global ERPs, ESG analysts, legal experts, and academia.

This multi-disciplinary composition indicates SEBI’s intent to capture perspectives across the financial ecosystem. ESG ratings increasingly influence capital allocation, credit risk assessment, and corporate reputation, making stakeholder alignment critical.

By incorporating both domestic and international ERP representatives, the review is positioned to consider cross-border investor expectations and global capital market integration.

Mandate Focuses on Transparency, Reliability, and Global Alignment

SEBI has tasked the working group with conducting a comprehensive review of the existing regulatory framework governing ERPs. It will examine representations and suggestions received from market participants and recommend measures to enhance transparency, reliability, and investor confidence in ESG ratings.

The group will also evaluate international regulatory developments in the ESG ratings space and identify areas for alignment with global best practices, while considering the Indian market context.

This dual focus reflects the tension regulators face worldwide: improving comparability and trust in ESG metrics while preserving flexibility for local market conditions and development priorities.

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ESG Ratings Under Global Regulatory Scrutiny

Regulators in the European Union, Japan, and the United Kingdom have intensified oversight of ESG ratings providers, citing concerns over conflicts of interest, opaque methodologies, and inconsistent scoring outcomes. ESG ratings can materially influence capital flows, index inclusion, debt pricing, and sustainability-linked financing structures.

For India, improving ERP oversight supports broader policy priorities, including sustainable finance mobilization, climate transition planning, and strengthening corporate governance standards. As domestic companies increasingly tap global capital markets, alignment with international expectations becomes essential.

Implications for Investors, Issuers, and ESG Data Providers

For institutional investors, enhanced oversight could improve comparability and reduce reliance risks tied to divergent ESG scoring frameworks. Greater transparency may also support fiduciary duties and stewardship obligations tied to sustainability outcomes.

Issuers may face more standardized disclosure expectations and clearer evaluation criteria, potentially reducing rating variability and reputational risk. Meanwhile, ESG rating providers could see tighter governance standards, methodology disclosures, and conflict management requirements.

The working group will submit its report to SEBI with findings and recommendations on policy and regulatory changes required in the ERP framework.

A Governance Signal in the Global ESG Architecture

SEBI’s review comes as ESG ratings become embedded in financial decision-making worldwide. By reassessing oversight and exploring alignment with international regulatory developments, India is positioning its markets within an evolving global sustainability governance framework.

For global investors and sustainability leaders, the outcome may shape how emerging markets standardize ESG evaluation, improve trust in sustainability metrics, and channel capital toward credible transition pathways.

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