India’s market regulator, the Securities and Exchange Board of India (SEBI), has unveiled new guidelines detailing when and how ESG (Environmental, Social, and Governance) ratings can be withdrawn by rating agencies. This development aligns the country’s ESG withdrawal standards with long-established credit rating practices and responds to increasing global scrutiny surrounding sustainability disclosures and reporting obligations.
“These guidelines aim to streamline ESG rating practices and address operational challenges faced by both rating agencies and stakeholders,” said SEBI Chairperson Tuhin Kanta Pandey, in response to growing concerns over complex environmental, labor, and social reporting requirements.
Key Changes to ESG Rating Withdrawal Guidelines
Under the new framework introduced on April 29, 2025, ESG ratings can be withdrawn under the following circumstances:
- For Subscriber-Pays Models:
- ESG ratings can be withdrawn if there are no active subscribers at the time of the request.
- Ratings can also be withdrawn if the company has failed to submit a valid Business Responsibility and Sustainability Report (BRSR).
- However, ratings tied to broader indices such as Nifty 50 cannot be removed as long as the index continues to have subscribers.
- For Issuer-Pays Models:
- A rating can only be withdrawn if the rated security has been assessed for at least three years or for 50% of its total tenure, whichever is longer.
- Additionally, a no-objection certificate from 75% of bondholders (by value) is required for the withdrawal.
- For company-level ratings, a continuous three-year rating history is needed without the necessity of bondholder consent.
All rating withdrawals must comply with the internal policies of the rating agencies, which must be made publicly available on their websites. Once a rating is withdrawn, it cannot be redistributed.
Enhancing ESG Transparency and Global Alignment
In addition to these changes, SEBI has mandated that stock exchanges prominently display ESG ratings on listed companies and securities pages, thereby boosting transparency for investors. This move ensures better accessibility of ESG data, helping investors make informed decisions based on sustainability performance.
India’s regulatory update comes amid growing international pressure to standardize ESG ratings, with global frameworks being recalibrated by authorities such as the European Commission and U.S. regulators. Notably, Moody’s Ratings has placed India in a high-risk category on environmental and social metrics, emphasizing the need for strong, credible ESG practices in the country.
As part of these reforms, SEBI also continues to focus on strengthening oversight of ESG reporting, aiming to elevate India’s position in global sustainability efforts while enhancing trust in ESG ratings and disclosures.
The new rules are effective immediately, marking a significant step in India’s ongoing efforts to improve its ESG framework.
