Schedule VII - Code of conduct for ESG Rating Providers - Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999

1 [ SEVENTH SCHEDULE [See regulation 28J] CODE OF CONDUCT FOR ESG RATING PROVIDERS 1. An ESG rating provider shall make all efforts to protect the interests of the investors. 2. An ESG rating provider, in the conduct of its business, shall observe high standards of integrity, dignity and fairness in the conduct of its business. 3. An ESG rating provider shall fulfil its obligations in a prompt, ethical and professional manner. 4. An ESG rating provider shall, at all times, exercise due diligence, ensure proper care and exercise independent professional judgment in order to achieve and maintain objectivity and independence in the ESG rating process. 5. An ESG rating provider shall maintain records to support its decisions. 6. An ESG rating provider shall adopt and implement ESG rating processes that reflect consistent rating standards. 7. An ESG rating provider shall not indulge in any unfair competition, nor shall it induce or induct the clients of any other ESG rating provider on assurance of higher or lower ESG rating. 8. An ESG rating provider shall keep track of all important changes relating to the issuers or securities it rates and shall develop efficient and responsive systems to yield timely and accurate ratings. 9. An ESG rating provider shall also monitor closely all relevant factors that might affect the environmental, social or governance characteristics of the rated issuers or their securities. 10. An ESG rating provider shall, wherever necessary, disclose to the client, all possible sources of conflict of duties and interests, which could impair its ability to make fair, objective and unbiased ratings. 11. An ESG rating provider shall ensure that no conflict of interest exists between any member participating in the rating analysis, and that of the person who is being rated or whose securities are being rated. 12. An ESG rating provider shall not make any exaggerated statement, whether oral or written, to the client either about its qualification or its capability to render any services or its achievements with regard to the services rendered to other clients. 13. An ESG rating provider shall not make any untrue statement, suppress any material fact or make any misrepresentation in any documents, reports, papers or information furnished to the Board, stock exchange or public at large. 14. An ESG rating provider shall promptly inform the Board about any action, legal proceedings etc., initiated against it alleging any material breach or non-compliance by it, of any of the laws, rules, regulations to which it is subject, and of directions of the Board or of any other regulatory body. 15. An ESG rating provider shall maintain an appropriate level of knowledge and competence and abide by the provisions of the Act, regulations and circulars, which may be applicable and relevant to the activities carried on by the ESG rating provider. 16. An ESG rating provider shall ensure that there is no misuse of any privileged information including prior knowledge of ESG rating decisions or changes. 17. An ESG rating provider or any of its employees shall not render, directly or indirectly any investment advice about any security being rated or about any rated person or the person whose securities are rated in publicly accessible media. 18. An ESG rating provider shall ensure that any change in registration status or any material change in financials or in case of any penal action taken by the Board which may adversely affect the interests of clients or investors is promptly informed to the clients and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients or investors. 19. An ESG rating provider shall maintain an arm s length relationship between its ESG rating activity and any other activity. 20. An ESG rating provider shall develop its own internal code of conduct for governing its internal operations and laying down its standards of appropriate conduct for its employees and officers in the carrying out of their duties within the ESG rating provider and as a part of the industry. Such a code shall provide for the maintenance of professional excellence and standards, integrity, confidentiality, objectivity, avoidance of conflict of interests, disclosure of shareholdings and interests, etc. Such a code shall also provide for procedures and guidelines in relation to the establishment and conduct of the officers and employees serving in the rating process. 21. An ESG rating provider shall provide adequately empower its compliance officer to enable him or her to effectively discharge his duties. 22. An ESG rating provider shall ensure that the senior management, particularly decision makers, have access to all relevant information about its business on a timely basis. 23. An ESG rating provider shall ensure that good corporate policies and corporate governance are adopted and followed. 24. ESG rating provider shall not, generally and particularly, in respect of issuers or securities rated by it, be party to or instrumental for (a) creation of false market; (b) price rigging or manipulation; or (c) dissemination of any unpublished price sensitive information in respect of securities which are listed and proposed to be listed in any stock exchange, unless required, as part of rationale for the rating accorded. ] *************** NOTES:- 1. Inserted vide Notification No. SEBI/LAD-NRO/GN/2023/136 dated 03-07-2023