Disclosure of ESG ratings – automated or still needs manual disclosure?

Ankit Singh Mehar, Assistant Manager | corplaw@vinodkothari.com

Background

Pursuant to the recommendations of the Expert Committee and as discussed in the SEBI Board meeting held on Sep 30, 2024 and outlined in SEBI Circular dated December 31, 2024, stock exchanges (‘SEs) were mandated to specify the process and timelines for system-driven disclosure (‘SDD’) for any new ratings or revision in ratings. Pursuant to this, NSE and BSE issued their respective circulars specifying the procedural requirements with respect to system-driven disclosures for the ratings (‘SDD Circulars’) on August 1, 2025.

The receipt and/ or change in ESG ratings is a disclosable event in terms of Regulation 30 of the Listing Regulations read with clause (3) of Sch. III.A.A thereof. Hence, a question arises on whether or not the same is also covered by the SDD Circulars, or whether a manual disclosure is still required on receipt/ change of ESG ratings.

What is an ESG rating?

ESG rating is defined under Reg 28B(1)(b) of SEBI (Credit Rating Agencies) Regulations, 1999. However, to put it simply, an ESG rating is essentially an opinion about (a) either an ‘issuer’ or (b) a security. The ESG ratings provide an opinion on the ESG profile or characteristics, and may either refer to the ESG risks faced by the entity or the impact it may have on the environment and the society, or both.

As per SEBI’s framework for ESG rating provider, an ESG rating provider (‘ERP’) uses either of the below-mentioned models:

1. Subscriber-pays model – wherein ratings are solicited by the subscribers that may include banks, insurance companies, pension funds, or the rated entity itself. 
2. Issuer-pays – wherein the ratings are solicited by the rated entity, in terms of a written contractual agreement between such entity and the rating provider.

Disclosure requirement under Reg 30 of Listing Regulations

Any receipt of rating or revision in existing ESG rating is a ‘deemed material event’ and covered under clause (3) of Sch. III.A.A of Listing Regulations. Since the event emanates from outside the listed entity, such event is required to be disclosed to the SEs within 24 hours of such receipt / information.

Here, the following needs to be noted w.r.t. the disclosure requirements under Reg 30:

• Ratings received under both subscriber-pays and issuer-pays model (solicited as well as unsolicited) are required to be disclosed.
• Both upward and downward revision in ratings is required to be informed.
• Withdrawal of an existing rating is required to be disclosed
• Re-affirmation of an existing rating is required to be disclosed as well.

Automation of ESG rating disclosure

The SDD Circulars referred above, are applicable to both credit ratings and ESG ratings. Pursuant to the same, the ERPs are required to report the ESG ratings provided by them to the SEs. The manner of reporting by ERPs has also been provided in the SDD Circular itself. Once reported to the SEs, the ESG rating shall be automatically reflected on the website of the BSE and NSE.

Therefore, since SEs will get the ratings from the ERPs itself, both solicited and unsolicited ratings will be disclosed on the SE platform.

When does this SDD come into effect?

In terms of SDD Circulars, the disclosure of credit and ESG rating has become effective from August 2, 2025.

Actionable for the LEs?

Since the ESG rating shall be consumed by the SEs from the ERPs and auto disseminated on the website, there is no actionable for the LEs in relation to the disclosure of ESG rating under reg 30. However, LEs should monitor whether the ratings provided to them are reflected on SEs. In case any rating is not reported by the ERP, the LE may proactively disclose the same at its end.

Refer our resources below:

• LODR Resource Centre
• Resource Center on ESG and sustainability