ESG Ratings in India: How SEBI's ERP Framework Affects Listed Companies and Their BRSR Data

India regulated ESG rating providers three years before the European Union did, and gave rated companies something the EU regime does not: a formal right to comment on a rating before it reaches the market, with those comments published alongside it.

That is a meaningful difference. Under the EU ESG Rating Regulation, which began applying in July 2026, a rated company gets methodology transparency and a factual correction pathway but no right to respond. Under SEBI's framework, an Indian listed company receives the rating report at the same time as subscribers, has two working days to comment, and anything it submits within that window goes into an addendum to the report.

Most Indian listed companies do not use that right. Here is how the framework works, how your BRSR data becomes a score, and how to engage with the process.

How The Framework Came About

The International Organization of Securities Commissions recommended in 2021 that securities regulators increase scrutiny of ESG rating providers. SEBI moved first among major emerging markets.

A consultation paper followed in January 2022, a draft framework in February 2023, and board approval in March 2023. The rules were implemented as an amendment to the SEBI (Credit Rating Agencies) Regulations, 1999, inserting a dedicated chapter for ESG rating providers rather than creating a standalone regulation. From July 2023, only entities registered with SEBI may provide ESG rating services in India.

SEBI issued a Master Circular for ESG Rating Providers in July 2023 and a consolidated Master Circular in July 2025, which is the current operative document. The framework was amended in April 2025, principally affecting the subscriber-pays model.

Who Can Provide An ESG Rating

Registration requirements are more prescriptive than most jurisdictions.

An ERP must be incorporated as a company under the Companies Act, 2013, with ESG rating activity specified as the primary object in its memorandum of association. That forecloses ESG rating as a side business run through an entity constituted for something else.

Providers fall into two categories distinguished by net worth, with Category I carrying the higher requirement.

Where an ERP is associated with or a subsidiary of a credit rating agency, it must clearly distinguish ESG ratings from credit ratings on its website and in its rating reports. Several Indian ERPs sit within credit rating groups, so this separation obligation applies widely in practice.

The Two Business Models

SEBI permits two revenue models and expressly prohibits hybrids.

Issuer-pays. The rated company pays for its own rating. The advantage is dissemination, since the rating reaches all investors without a paywall. The disadvantage is the obvious conflict, familiar from decades of credit rating debate: the entity being assessed is the entity paying.

Subscriber-pays. Investors pay. Subscribers include banks, insurance companies, pension funds and, notably, the rated entity itself. This model carries fewer conflict concerns but restricts access, since reports sit behind subscription pricing that smaller institutional investors may not meet.

The prohibition on hybrid models is a deliberate design choice, intended to prevent an ERP from operating in a way where investors cannot tell who funded a given rating. An ERP picks a lane.

The Subscriber-Pays Rules That Changed In 2025

The April 2025 amendment tightened the subscriber-pays model considerably, and these provisions are where rated companies gain their most useful rights.

Ratings must be based only on publicly available information. An ERP operating subscriber-pays cannot use non-public data obtained from the rated entity. This is the cleanest conflict control in the framework and it has a direct consequence for companies: under subscriber-pays, what you disclose publicly is the entire input.

Simultaneous sharing and a comment window. The ERP must share the rating report with subscribers and the rated entity at the same time, and must give the rated entity two working days to provide comments.

Comments become part of the record. All comments or clarifications received within that window are included in an addendum to the rating report. This is the provision worth internalising. Your response does not disappear into a provider's inbox. It travels with the rating.

A clarification facility. ERPs must provide a facility for the rated entity to seek clarification, including on the rating methodology or the assumptions used.

Fee neutrality where the issuer subscribes. If the rated entity is itself a subscriber, the fee it pays must be the lowest fee paid among all subscribers. This closes the route by which a company could effectively purchase favourable treatment through a premium subscription.

Subscriber eligibility limits. Only group companies or associates whose core business requires ESG ratings, and which are regulated by financial sector regulators, may subscribe.

Policy disclosure. ERPs must publish on their websites their policy on sharing rating reports with rated entities and subscribers.

Core ESG Ratings And The BRSR Link

The distinctive feature of the Indian framework is the link between ratings and a specific, assured dataset.

SEBI created a separate category of Core ESG Ratings, based on the BRSR Core disclosures. BRSR Core is the subset of the Business Responsibility and Sustainability Report covering nine ESG attributes, which listed companies must have subjected to reasonable assurance or an independent assessment against Industry Standards Forum standards.

The logic is sound. An ESG rating is only as reliable as its inputs, and most global ratings are built on self-reported, unverified data. By anchoring a rating category to assured data, SEBI created something closer to an audited base. It also enables standardised rating products, since every ERP works from the same verified figures for the same attributes.

The phasing follows BRSR Core, which has reached the top 500 listed companies for FY 2025-26 and extends to the top 1,000 for FY 2026-27, ranked by market capitalisation.

Beyond Core, ERPs may also produce broader ESG ratings drawing on the full BRSR, public information, third-party verification and controversy data. So a company can carry both a Core ESG Rating grounded in assured data and a wider rating incorporating unverified inputs, and these are different products that should not be read interchangeably.

What Your BRSR Data Actually Feeds

The rating process starts with your BRSR filing, and understanding what is in it, and what is not, tells you where your score comes from.

BRSR Core covers nine attributes, including greenhouse gas footprint, water, energy, waste and circularity, employee wellbeing and wages, gender diversity, inclusive development, fairness in dealing with customers and suppliers, and openness of business.

The GHG attribute is Scope 1 and Scope 2 only. SEBI's format defines it as emissions intensity, being Scope 1 plus Scope 2 divided by revenue from operations adjusted for purchasing power parity, and again against total output. Scope 3 is not among the assured Core attributes. It sits in BRSR's leadership indicators, which are voluntary.

That creates a gap worth understanding. The assured foundation of an Indian ESG rating contains no verified Scope 3 data, at precisely the moment when global investors, EU customers and every major disclosure regime have moved value chain emissions to the centre of the analysis. An ERP wanting to assess your value chain exposure will be using unverified or estimated inputs, or none.

Value chain disclosure is voluntary. It applies to the top 250 companies from FY 2025-26, using a threshold of partners individually accounting for 2 per cent or more of purchases or sales, and assessment of that data is voluntary from FY 2026-27.

The practical consequence is that a company with strong value chain performance has no assured route to demonstrate it, and a company with weak value chain performance has no assured route by which it is exposed. Both are rated on the same incomplete base.

How To Review And Challenge Your Score

Indian listed companies have more procedural rights here than their counterparts in most markets, and the rights are underused.

Know which model rates you. Under subscriber-pays, the rating uses only publicly available information, so any gap in the rating is a gap in your public disclosure and the remedy is to disclose. Under issuer-pays, you have a direct commercial relationship and can supply non-public data.

Use the two working day window. It is short, which means the response has to be prepared rather than composed. Have a standing process: a named owner, access to the underlying BRSR working papers, and a template for factual corrections.

Focus on facts, not conclusions. As under the EU regime, methodological judgement belongs to the provider. What you can effectively contest is whether the provider used superseded data, missed a disclosure you published, applied an estimate where an actual figure exists, or misclassified an activity. Arguing that a weighting is unfair rarely moves anything.

Use the clarification facility deliberately. You are entitled to ask about methodology and assumptions. That is the route to understanding why your score differs from a peer's, and the answers inform next year's disclosure rather than this year's rating.

Remember the addendum. Comments submitted in the window are attached to the report that investors read. A well-argued factual correction is visible to your investors even if the provider does not change the score.

Check the credit rating separation. If your ERP sits inside a credit rating group, confirm that its materials distinguish the two clearly, since conflation of an ESG rating with a credit opinion is a real risk to how your securities are perceived.

The Weakness In The System

An honest assessment has to acknowledge a structural criticism that commentators have raised.

The framework rests on BRSR as its primary dataset, but concerns persist about the consistency and standardisation of BRSR content itself, and about the variety and reliability of the supplementary sources ERPs layer on top. If the underlying disclosures vary in quality and interpretation between companies, standardising the rating process on top of them does not fully solve the comparability problem it was designed to address.

The Core ESG Rating category is the strongest response to this, because assurance addresses data reliability directly. But it covers nine attributes, excludes Scope 3, and reaches only the largest listed companies. Outside that perimeter, Indian ESG ratings rest on much the same foundations as ratings anywhere else.

SEBI has also been considering further changes for ease of doing business, including allowing ERPs to rate unlisted securities and other products, and adjusting disclosure requirements to stock exchanges. Companies should watch for developments rather than treating the current framework as settled.

The Comparative Point

For companies rated in both India and Europe, the contrast is instructive.

The EU ESG Rating Regulation delivers stronger structural controls, including mandatory authorisation by a single supervisor, prohibitions on conducting certain activities in the same legal entity, and detailed methodology disclosure requirements. It gives rated companies transparency but no right of response.

SEBI's framework delivers weaker structural separation but stronger procedural rights, including simultaneous disclosure, a comment window and a published addendum, plus something no other major regime has, which is a rating category anchored to independently assured data.

Neither is complete. A company operating across both should use the Indian comment right actively and the European transparency right analytically, and should recognise that its assured Indian data has a Scope 3 hole that European counterparties will notice.

Engagement Checklist

1. Identify every SEBI-registered ERP that rates you, and confirm whether each operates issuer-pays or subscriber-pays, since hybrids are not permitted.

2. Under subscriber-pays, remember the rating uses only publicly available information, so disclosure gaps become rating gaps.

3. Establish a standing process to respond within the two working day comment window, with a named owner and access to BRSR working papers.

4. Confine comments to factual corrections rather than methodological disagreement.

5. Use the clarification facility to ask about methodology and assumptions, and feed the answers into next year's disclosure.

6. Remember that comments submitted in the window are published as an addendum to the rating report.

7. If you are a subscriber to your own rating, confirm you are paying the lowest fee among all subscribers, as required.

8. Distinguish your Core ESG Rating, anchored to assured BRSR Core data, from broader ratings using unverified inputs.

9. Confirm your BRSR Core cohort, being the top 500 for FY 2025-26 and top 1,000 for FY 2026-27 by market capitalisation.

10. Recognise that BRSR Core assurance covers Scope 1 and Scope 2 only, and that Scope 3 sits in voluntary leadership indicators.

11. Consider voluntary value chain disclosure if you have a strong story, since there is no assured route to demonstrate it otherwise.

12. Where your ERP belongs to a credit rating group, confirm ESG ratings are clearly distinguished from credit ratings.

13. Monitor SEBI proposals on ease of doing business affecting the ERP framework.

14. If you are also rated in the EU, use the Indian comment right and the European methodology transparency together.

Position as of September 2026. SEBI's ERP framework sits within the SEBI (Credit Rating Agencies) Regulations, 1999 as amended, with the operative Master Circular consolidated in July 2025 and further amendments under consideration. Confirm current requirements against SEBI circulars and take professional advice for your circumstances.

Sources

Securities and Exchange Board of India, SEBI, Industry Standards Forum, International Organization of Securities Commissions, Regulation (EU), Business Standard, India Briefing, Mondaq, The Contemporary Law Review, IRCCL

This article is intended for general professional information and does not constitute legal, financial, or investment advice.