Regulation 28K - Transparency, governance and prevention of conflict of interest - Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999

1 [ Transparency, governance and prevention of conflict of interest 28K . The ESG rating provider shall: (a) maintain a website and disclose the ESG ratings, type of ESG rating (whether risk-based or impact-based or otherwise), scores on environmental, social and governance parameters and other parameters forming a part of the ESG rating, on such a website for public access and provide a hyperlink to the methodology of assigning an ESG rating; (b) prioritize adequate levels of public disclosure and transparency for its ESG ratings products, including its methodologies and processes; (c) disclose its rating methodology for all ESG ratings on its website, while maintaining a balance with respect to proprietary or confidential aspects of the methodologies, and include category-wise weightages of environmental, social, and governance factors in ESG ratings, as well as the weightage of high-level themes or key issues in each of the three factors; (d) disclose the category under which the ESG rating provider is registered in all its disclosures related to ESG ratings on its website; (e) use terminologies which are relevant and reflective of the characteristics of the ESG ratings product offered and, if the ESG rating provider is an associate or subsidiary of a credit rating agency, the ESG rating provider shall prominently display that ESG ratings are different from credit ratings, through its website and the ESG rating reports; (f) disclose the changes in the ESG rating methodology and consequential changes in ESG ratings on its website; (g) disclose the extent to which a change in ESG rating is on account of the change in the ESG rating methodology; (h) maintain and disclose archives of previous ESG rating methodologies and ESG ratings on its website, in an easily downloadable and machine-readable format, preferably in eXtensible Business Reporting Language; (i) publish its average one-year ESG rating transition rate on its respective website, in a manner as may be specified by the Board; (j) disclose, on its website, the general nature of compensation arrangements with clients and whether the ESG ratings assigned were solicited or unsolicited; (k) take other measures that the Board may consider material for a true and fair understanding of the ESG rating; (l) identify, disclose, and to the extent possible, avoid or appropriately mitigate potential conflicts of interest; (m) formulate policies and internal codes of conduct for dealing with conflicts of interest and prominently disclose the policies on its website; (n) identify, disclose and, to the extent possible, mitigate potential conflict of interest that may arise between ESG rating provider and its clients or client groups, or between multiple clients, or between the rated issuer or issuer whose securities are being rated and other clients or client groups, or between the ESG Rating Provider and any other sources; (o) ensure that ESG ratings are not affected by any existing or potential business relationship between the ESG rating provider or its associates and any person for which it provides ESG ratings or associates of such person; (p) structure reporting lines for its staff and their compensation arrangements to eliminate or to the extent possible, mitigate actual and potential conflicts of interest; (q) not provide consulting or advisory services relating to or any areas related to environmental, social and governance aspects including ESG ratings; and (r) adopt and implement written policies and procedures to ensure that its decisions are independent, free from any form of undue interference or influence. ] *************** NOTES:- 1. Inserted vide Notification No. SEBI/LAD-NRO/GN/2023/136 dated 03-07-2023