CRISIL's wholly owned subsidiary gets Sebi nod for ESG rating

In July 2023, the market regulator amended the Credit Rating Agencies Regulations to include a chapter on ESG Rating Providers, to ensure that no entity provides ESG Rating unless it is certified by Sebi.

A wholly owned subsidiary of CRISIL Ratings has been approved to give environmental, social and governance (ESG) ratings.

A press statement released by Crisil Rating stated, "The Securities and Exchange Board of India (SEBI) has approved CRISIL ESG Ratings & Analytics Ltd (CRISIL ESG Ratings), a wholly owned subsidiary of CRISIL Ratings Ltd (CRL), as a Category 1 provider of environmental, social
and governance (ESG) ratings."

In July 2023, the market regulator amended the Credit Rating Agencies Regulations to include a chapter on ESG Rating Providers, to ensure that no entity provides ESG Rating unless it is certified by Sebi.

In September 2023, CRISIL's board approved the setting up of this step-down subsidiary to carry out the business of an ESG Ratings provider.

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The press release quoted Amish Mehta, Managing Director and CEO, CRISIL Ltd, as saying, “The approval comes at an opportune time when ESG disclosures have been improving and there is increasing realisation in the financial markets on the need for independent ESG ratings that will support decision-making for issuers and investors, and channel funds towards sustainable growth of the Indian economy.”

CRISIL Ltd launched its ESG ‘scoring’ business in 2021 and gradually expanded coverage from 225 to ~1,000 companies across ~65 sectors. This business will now be transferred to CRISIL ESG Ratings.

Gurpreet Chhatwal, Managing Director, CRISIL Ratings, said, “The ESG scores, which will henceforth be called ‘ESG ratings’, have already found traction among market participants. These are based on a unique India-specific framework that factors in nuances at the sectoral level, while being guided by global best practices. The process includes analysis of more than 500 unique data points across the environmental, social and governance aspects for each company.”

Also read: 'Frustrating' demands placed on working group for ESG framework: Sebi’s Madhabi Puri Buch

CRISIL ESG ratings will also help investors to measure and monitor ESG risks in their portfolio and identify investment opportunities considering long-term sustainability of businesses, in addition to the traditional investment risks, stated the press release.