CareEdge-ESG Joins SEBI’s List Of Indian ERPs Providing ESG Ratings

New Delhi, May 6, 2024: The Securities and Exchange Board of India (SEBI) has approved Care ESG Ratings Limited request to operate as a Category I ESG Ratings Provider (ERP). With this green light, the rating agency, which operates as part of the CareEdge Group, can kickstart its environmental, social, and governance (ESG) rating activities.

CareEdge is a knowledge-based analytical group that offers a range of services including ratings, analytics, consulting, and now ESG ratings.

As per CareEdge-ESG, the rating agency has developed a comprehensive framework where they have sourced key rating indicators from both domestic and global rating frameworks and tailored them to the Indian context. The rating agency plans to evaluate over 700 data points and employ an indicator-level materiality approach to assign weights.
Rohit Inamdar, CEO of CareEdge-ESG, said that the company’s India-specific approach to ESG ratings acknowledges the unique challenges faced by Indian companies. He also highlighted the importance of SEBI’s ERP regulation in addressing the country’s imperative for businesses to transition towards sustainability. 

Non-financial reporting is becoming more important because sustainable practices are closely linked to long-term business success, especially towards attaining India’s net zero targets by 2070. In March 2023, SEBI came up with a comprehensive framework to standardise the mechanism and disclosure format of ESG ratings in India. The proposal also aims to allow ERPs to take an active role in rating listed Indian companies; however, agencies, including foreign agencies, that wish to provide ESG ratings to Indian companies have to be first registered with SEBI and obtain a certification from the body. 

So far, five rating bodies or ERPS have received SEBI’s approval to provide ESG ratings to Indian companies – ICRA’s Pragati Development Consulting Services Ltd., CRISIL ESG Ratings and Analytics, Acuité’s ESG Risk – Assessments & Insights, CARE’s ESG Ratings Ltd., and SES ESG Research Private Ltd. 

SEBI mandates that an ERP needs to follow a rating scale from 1 to 100, where 100 is the highest score. Furthermore, ERPs can only adopt one of two business models for revenue – they can either be subscriber-paid, where they earn from their subscribers, or issuer-paid, where they are paid by the entities that they rate.