TaxTMI 
TaxTMI 
Master Circular for ESG Rating Providers (ERPs)
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.... with the conditions laid down in this master circular. Also, ERPs shall have necessary systems and infrastructure in place for implementation of this circular. The Board of Directors of the ERP shall be responsible for ensuring compliance with these provisions. IV. This Master Circular is a compilation of the existing circulars as on date, with consequent changes. Accordingly, the list of existing circulars for ERPs which have been superseded by this Master Circular is placed at Appendix. V. Notwithstanding such rescission- a. anything done or any action taken or purported to have been done or taken under the rescinded circulars, prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular; b. any application made to the Board under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of this Master Circular; c. the previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the resc....
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.... 14. Request by Issuers for review/appeal of ratings provided by ERPs. 15. Governance Norms of ERPs. 16. Accountability of Rating Analysts of ERPs 17. Dealing with Conflict of interest 18. Guidelines on listed securities/instruments/products falling under the purview of other financial sector regulator/s or authority/ies' Chapter III : Reporting and Disclosures 19. Periodic Disclosures 20. Continuous Disclosures. 21. Guidelines on manner of disclosures by ERPs on its website: Chapter IV : Internal Audit for ERPs 22. Internal Audit for ERPs: 23. Requirements related to Internal Audit of ERPs: Chapter V : Miscellaneous 24. Designated e-mail ID for regulatory communication with SEBI: 25. Information regarding Grievance Redressal Mechanism: 26. Guidelines on Outsourcing of Activities by ERPs 27. General Guidelines for dealing with Conflicts of Interest of ERPs and their Associated Persons in Securities Market: 28. Standardization of Industry classification - Applicability to ERPs 29. Firewall between ERPs and their Affiliates: Annexure....
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....an application to SEBI for prior approval through the SEBI Intermediary Portal (https://siportal.sebi.gov.in). However, till operationalisation of SEBI Intermediary Portal for ERPs, an ERP may submit such application, in hard copy, addressed to "Chief General Manager, Department of Debt and Hybrid Securities, SEBI", as well as in soft copy, via email to [email protected]. 2.2.2. The abovementioned application by an ERP shall be accompanied by the following information/ declaration/ undertaking about itself, the acquirer(s) / the person(s) who shall have the control and the directors/ partners of the acquirer(s) / the person(s) who shall have the control: 2.2.2.1. Current and proposed shareholding pattern of the applicant 2.2.2.2. Whether any application was made in the past to SEBI seeking registration in any capacity but it was not granted? If yes, details thereof. 2.2.2.3. Whether any action has been initiated / taken under the Securities Contracts (Regulation) Act, 1956 (SCRA) / Securities and Exchange Board of India Act, 1992 (SEBI Act) or rules and regulations made thereunder? If yes, status thereof along with the corrective action taken to av....
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....the application with NCLT. 2.3.2. Upon being satisfied with compliance of the applicable regulatory requirements, an in-principle approval will be granted by SEBI; 2.3.3. The validity of such in-principle approval shall be three months from the date issuance, within which the relevant application shall be made to NCLT. 2.3.4. Within 15 days from the date of order of NCLT, the intermediary shall submit an online application in terms of paragraph 2.2 of this circular along with the following documents to SEBI for final approval: 2.3.4.1. Copy of the NCLT Order approving the scheme; 2.3.4.2. Copy of the approved scheme; 2.3.4.3. Statement explaining modifications, if any, in the approved scheme vis- à-vis the draft scheme and the reasons for the same; and 2.3.4.4. Details of compliance with the conditions/ observations, if any, mentioned in the in-principle approval provided by SEBI. 3. Transfer of business by SEBI registered intermediaries to other legal entity 3.1. SEBI has been receiving registration applications pursuant to transfer of business (SEBI regulated business activity) from one legal entity which....
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....the ERP, without any additional cost to such clients; 4.1.1.4. facilitate an orderly migration of assignments as desired by clients to other ERP(s) holding a certificate of registration under CRA Regulations; 4.1.1.5. continue to comply with the provisions of the CRA Regulations and circulars issued thereunder, till the time the ERP holds the certificate of registration; 4.1.1.6. continue to co-operate with SEBI with regard to sharing of information when requested and payment of fees as required under CRA Regulations; 4.1.1.7. take such other action including providing any records or documents within the time period and in the manner, as may be required under the CRA Regulations or as may be directed by SEBI. 4.1.2. The ERP, on and from the date of acceptance of the Request, or when it is commencing the winding up process, shall: 4.1.2.1. return the certificate of registration so cancelled to SEBI; 4.1.2.2. not represent itself to be a holder of certificate for carrying out the activity for which such certificate had been granted; 4.1.2.3. suspend undertaking activity for which such certificate had been granted....
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....es, make a representation for dispensing with the procedure, along with the application, for surrender in terms of the first proviso to Regulation 33B of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 in the prescribed format placed as Annexure 2. 4.1.5.4. In all cases of transfer of business or client accounts to another registered intermediary, the clients shall not be subjected to any additional cost. 4.1.5.5. ERP shall maintain its records, documents, information obtained from its clients during the course of ESG rating from its clients, for at least three years after surrender of registration. 4.1.5.6. In its application to SEBI, the ERP shall also provide an undertaking that it shall continue to maintain confidentiality of the data obtained by it from its existing clients for the purpose of ESG rating, unless asked to share such information by operation of law. 4.1.6. In case of surrender of certificate of registration, the ESG ratings assigned by the ERP whose certificate of registration is being surrendered, shall be valid till such time the client withdraws the assignment and/or migrates to another ERP, or the ....
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.....6, respectively, or a non-core variant thereof. For instance, if an ERP's transition scoring is based only on third-party assured data, the ERP shall not be required to provide a separate product called "Core Transition Score" or another separate product for transition score based on non-assured data. 5.4.2. If an ERP incorporates transition assessment in its ESG ratings or Core ESG ratings, then the ERP shall not be required to separately offer Combined Score or a Core Combined Score (Para 5.2.3 and Para 5.2.6 above) respectively. 5.4.3. However, in the above cases, such ERP must disclose the said facts in ESG rating rationales and ESG rating methodologies. 5.5. The above six ESG rating products shall: 5.5.1. suitably incorporate the environmental, social and governance aspects that are contextual to the Indian market. An indicative list of India-specific ESG parameters is placed at Annexure 3. 5.5.2. be assigned such that they allow comparison with companies in other sectors, i.e., such rating products must contain sector-agnostic ESG ratings. 5.5.3. adhere to guidelines specific to the rating product as detailed below....
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....y take any action as they deem appropriate. 5.7.3. Further, a Core Combined score incorporating Core ESG rating and Core transition rating, i.e., measuring both the status and the ability to transition shall also be provided. A Core Combined score shall be determined in the following manner: Core ESG Score + Core Transition or Parivartan Score = Core Combined Score Note: The "+" symbol does not denote a simple addition of the two scores. An ERP shall be free to combine the two scores in a way that is consistent with its publicly-disclosed rating methodology. 5.7.4. Core ESG rating, Core Transition or Parivartan Score, and Core Combined Score shall be offered by an ERP pursuant to availability of 'Business Responsibility and Sustainability Report (BRSR) Core' for the rated entity. 6. Rating Scale 6.1. In the interest of clarity to market participants, it is mandated that ESG ratings shall be provided on a scale of 0 - 100, where 100 represents the maximum score. 6.2. For existing outstanding ESG ratings, the ERPs shall disclose new rating symbols and definitions on their websites and update their rating lists on their websites; 6.3. For....
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....ERPs shall follow either of the following two business models: 8.1.1. "Subscriber-pays" business model, where the ERP derives its revenues from ESG ratings from subscribers that may include banks, insurance companies, pension funds, or the rated entity itself. 8.1.2. "Issuer-pays" business model, where the ERP derives its revenues from ESG ratings from the rated entity, in terms of a written contractual agreement between such entity and the ERP, which may contain such provisions as may be specified by SEBI. 8.2. In order to mitigate potential conflict of interests, it is mandated that ERPs shall not follow a hybrid business model, i.e. an ERP shall not assign certain ESG rating based on issuer-pay model, while assigning another ESG rating based on a subscriber-pays business model. 9. Rating Process 9.1. Each ERP shall frame detailed guidelines on the following and disclose the same on its website: 9.1.1. General nature of compensation arrangements with rated entities 9.1.2. Policy for request for review/appeal by Issuer against the rating being assigned to its securities 9.1.3. Guidelines on what constitutes non-cooperation, in ....
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....irness in conduct of the business and any act of omission or commission in contravention of the provisions of clauses 12 and/or 23 of Code of Conduct, as specified under Seventh Schedule of the CRA Regulations, in letter and spirit, may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 10. Monitoring and Review of Ratings 10.1. Material Events requiring a review 10.1.1. Regulation 28L(g) of CRA Regulations require an ERP to have efficient systems to track material developments related to environmental, social and governance factors to ensure timely and accurate ESG ratings. 10.1.2. Material developments in this respect shall be any event that results in a change of the ESG profile of the rated company. Such material developments shall include, but not be restricted to, publication of Business Responsibility and Sustainability Reporting (BRSR) or controversy/ penalty in environmental, social or governance areas. 10.1.3. ERPs shall carry out a review of the ESG ratings upon the occu....
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.... ESG Rating Date of rating The above disclosure may be segregated year-wise, indicating the Business Responsibility and Sustainability Report (BRSR) on which the ESG rating is based. 11.5. The rated entity/ issuer may provide its comments on the ESG rating report/ rating rationale to the ERP in the standardised format as devised by the ESG Rating Providers Association in consultation with SEBI. Further, the ESG Rating Providers Association, in consultation with SEBI, has framed the standards for the clarification to be provided by the ERP to the rated entity, balancing the minimum information that is to be provided while maintaining confidentiality of intellectual property of ERPs. The said format/ standards are enclosed as Annexure 5. ERPs following subscriber-pays business model shall ensure that the said format/ standards are disclosed on their websites and are shared with the rated issuer while sharing the ESG rating report/ rationale with the issuer.]^[3] 11.6. Disclosure of rating sensitivities in the rating rationale 11.6.1. The disclosure of factors to which the rating is sensitive, is critical for the end- users....
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....ll be considered as aiding and abetting the Issuer in suppression of material information by the ERP which would be in contravention of Clause 12 of Code of Conduct of ERPs and may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 by the ERP. 12.2. Issuer-Not-Cooperating: 12.2.1. Regulation 28M provides that if the rated issuer or the issuer whose securities are rated by the ERP refuses to co-operate with the ERP regarding review of the ESG rating, despite being under a contractual obligation to do so, the ERP shall review the ESG rating on the basis of the best available information. 12.2.2. In case of non-cooperation by the issuer (such as not providing information required for rating, non-payment of fees for conducting surveillance), in line with the existing Regulations, the ERP shall continue to review the ESG rating, on an ongoing basis throughout the rating's lifetime, on the basis of best available information, in accordance with CRA Regulations and circulars issued thereunder as w....
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....l assign any new ratings to an issuer, if the issuer is categorized as non-cooperative with all the ERPs for a continuous period of preceding 12 months, until the issuer resumes cooperation or the rating is withdrawn. 13. Withdrawal of ratings 13.1. Regulation 28M of CRA regulations prescribe, inter-alia, that an ERP shall not withdraw an ESG rating except in cases where the rated issuer, or the issuer whose security is rated, is wound up or merged or amalgamated with another company, or except in cases as may be specified by SEBI from time to time. Further, subject to CRA Regulations, ERP shall withdraw an ESG rating as per its documented policies which shall also be disclosed on its website. In this regard, an ERP shall adhere to the provisions of this circular in withdrawal of any ESG rating. 13.2. [In addition to the cases specified in Regulation 28M of the SEBI (Credit Rating Agencies) Regulations, 1999, the following is being specified: 13.2.1. For ERPs following a Subscriber-Pays business model: i. The ERP may withdraw a rating provided that there are no subscribers for the rating as on the date of withdrawal. ii. However, where the rated ....
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.... of an ERP shall constitute the following committees: 15.3.1. ESG Ratings Sub-Committee 15.3.2. Nomination and Remuneration Committee 15.4. The Rating team of an ERP shall report to a Chief Ratings Officer (CRO). 15.5. The Chief Ratings Officer (CRO) shall directly report to the ESG Ratings Sub- Committee of the board of the ERP. 15.6. The Nomination and Remuneration Committee shall be chaired by an independent director. 15.7. [Considering the challenges faced by Category II ERPs in the initial years of operation, the requirement for constitution of an ESG Ratings Sub-Committee and Nomination and Remuneration Committee (NRC), as mentioned in Para 15.3, shall become effective for Category II ERPs from April 29, 2027. Until the said time, the relevant issues under the purview of NRC and ESG Ratings Sub-Committee may be handled by the Board of the Category II ERP.]^[5] 16. Accountability of Rating Analysts of ERPs 16.1. Roles and responsibilities of the ESG rating analysts/team of ERPs shall be clearly laid out by the ERP. 16.2. Analysts or other members of the ESG rating team shall be responsible for undertaking the ESG rating proces....
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....shall apply to the Compliance Officer for prior approval of transactions for purchase or sale of securities of the companies which have been rated by the ERP or whose securities/instruments/facilities have been rated by the ERP. b. The Compliance Officer of the ERP shall apply to the Chief Executive of the ERP for such prior approval. c. The CEO/Compliance Officer shall ensure that there is no conflict of interest while considering the request for prior approval. d. Such approvals, if granted, shall be valid for 7 working days from the date of approval. 17.3.4.4. Disclosures a. Any person, who becomes an employee of the ERP, shall submit a statement of holding of all securities in respect of persons mentioned at para 17.3.2 above to the Compliance officer or Chief Executive, as the case may be, within 7 working days of joining ERP. b. All employees of ERP including the Access Persons shall submit the following details to the CEO/Compliance Officer, as the case may be: i. Details of purchase or sale transactions effected within 7 working days from the date of transaction. ii. A consolidated statement of holding ....
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.... Sheet presenting a snapshot of the rating actions carried out during the year shall be uploaded by the ERPs on their websites, in the format specified at Annexure 6. The disclosure in the "Rating Distribution for outstanding ratings as on 31st March" section of Annexure 6 shall also include number of INC ratings outstanding in each category also, if applicable. 19.3.1.2. Details of new ESG ratings assigned during last year (Annexure 7) 19.3.1.3. Movement of ESG rating of all outstanding listed entities/ securities during the last year (Annexure 8), 19.3.1.4. The history of ESG rating of all outstanding listed entities/ securities (Annexure 9), 19.3.2. Disclosure of Average Rating Transition Rates 19.3.2.1. Regulation 28K of CRA Regulations requires an ERP to publish its average one-year ESG rating transition rate on its respective website, in a manner as may be specified by SEBI; 19.3.2.2. Transition studies are central to evaluating the performance of an ERP and provide an insight on the stability of ratings over a period of time. In order to promote transparency and to enable the market to best judge the performance of the ra....
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....ith the issuers. 19.3.3.2. its total receipt from ESG rating services and non-ESG rating services, 19.3.3.3. issuer wise percentage share of non-ESG rating income of the ERP and its subsidiary to the total revenue of the ERP and its subsidiary from that issuer, and 19.3.3.4. names of the rated issuers who along with their associates contribute 10% or more of total revenue of the ERP and its subsidiaries. 20. Continuous Disclosures 20.1. An ERP shall make all the disclosures stipulated below on their websites and maintain the same at all times. 20.2. The rating history, Rating Rationales and Rating Reports, including those ratings which have been withdrawn, shall be available on the ERP's website. 20.3. Disclosures in case of delay in periodic review: 20.3.1. Regulation 28M of CRA Regulations prescribe that an ERP shall annually, or if required, more frequently, review each of the published ESG ratings, unless the ESG rating is withdrawn in accordance with these regulations. 20.3.2. Accordingly, each ERP shall promptly disclose on its website details of all such ratings where the review became due but was not completed by ....
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....levant stock exchange(s). 21. Guidelines on manner of disclosures by ERPs on its website: 21.1. In order to facilitate enhanced transparency and usability of disclosures made by ERPs on their websites, the following is directed: 21.1.1. Disclosures required by ERPs on their websites under various SEBI circulars should be provided in excel / machine readable format. 21.1.2. An archive of all disclosures should be maintained by ERPs on their website, for at least 10 years. This also includes rating rationales by ERPs. 21.1.3. ERPs may add footnotes in the disclosures mandated by SEBI for purpose of better understanding of methodology of such disclosure by stakeholder's subject to methodology explained being in line with the SEBI Regulations and circulars issued thereunder. Chapter IV : Internal Audit for ERPs 22. Internal Audit for ERPs: 22.1. The audit envisaged under Regulation 22S of the CRA Regulations shall include an internal audit to be undertaken in the following manner: 22.1.1. It shall be conducted on a yearly basis. 22.1.2. It shall be conducted by Chartered Accountants, Company Secretaries or Cost and Managem....
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....n shall include but not be limited to following checks: 23.3.1. Whether the ERP maintains the minimum net worth requirement under CRA Regulations. 23.3.2. Status of targets / projections submitted by the ERP to SEBI during its application for registration. 23.3.3. ERP and its employees, who are associated directly or indirectly with the rating business, have complied with the regulations and code of conduct. 23.3.4. ERP has defined processes for operations that have been followed during the rating exercise. 23.3.5. Policy in respect of non-cooperation by the issuer, if applicable, including procedures to be followed for the same, have been complied with. 23.3.6. Review of ratings has been carried out as per the review policy of the ERP. 23.3.7. Verify the rating disclosures made by the ERPs on their website. 23.3.8. Comment on the conflict of interest, if any. 23.3.9. The audit shall also cover adherence to the prescribed methodology for calculation of transition rates. 23.3.10. Compliance by ERP with the provisions of all the Circulars shall be verified during yearly Internal Audit. 23.4. ....
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....of the ERP>" 24.4. The file shall contain the following details: Name Address Category Registration No. Designated email ID Name of compliance officer 25. Information regarding Grievance Redressal Mechanism: 25.1. For information of all investors who deal/ invest/ transact in the market, the information as provided below shall be prominently displayed in the offices of the ERPs: Dear Investor, In case of any grievance / complaint against the ESG rating provider: Please contact Compliance Officer of the ESG rating provider (Name and Address) / email-id ([email protected]) and Phone No. - 91-XXXXXXXXXX. You may also approach CEO / Partner / Proprietor (Name) / email-id ([email protected]) and Phone No. - 91-XXXXXXXXXX. If not satisfied with the response of the ERP you can lodge your grievances with SEBI at http://scores.gov.in or you may also write to any of the offices of SEBI. For any queries, feedback or assistance, please contact SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575. 26. Guidelines on Outsourcing of Activities by ERPs 26.1. Outsourci....
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.... fair treatment of their clients and not discriminate amongst them; 27.5.4. ensure that their personal interest does not, at any time conflict with their duty to their clients and client's interest always takes primacy in their advice, investment decisions and transactions; 27.5.5. make appropriate disclosure to the clients of possible source or potential areas of conflict of interest which would impair their ability to render fair, objective and unbiased services; 27.5.6. endeavor to reduce opportunities for conflict through prescriptive measures such as through information barriers to block or hinder the flow of information from one department/ unit to another, etc .; 27.5.7. place appropriate restrictions on transactions in securities while handling a mandate of issuer or client in respect of such issuer/security so as to avoid any conflict; 27.5.8. not deal in securities while in possession of material non - published information 27.5.9. not to communicate the material non-published information while dealing in securities on behalf of others 27.5.10. not in any way contribute to manipulate the demand for or supp....
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....he same. Such policy, and revisions thereto, shall be ratified by the Board of Directors of the ERPs and the policy may cover inter-alia the following: 29.1.1.1. Nature and extent of sharing of infrastructure, officials/employees or resources, if any, between the ERP and the non-ERP entity, including specification on whether such arrangement is temporary. 29.1.1.2. Measures taken by ERP to ensure the independence of its ESG rating process in view of the above arrangement with the non-ERP entity. 29.1.1.3. Guidance to employees on sharing of information or resources, if any, between the ERP and the non-ERP entity in order to mitigate any potential or actual conflict of interest. 29.1.2. An ERP shall disclose on its website, details of any common director or Chief Executive Officer or Managing Director between the ERP and the non- ERP entity. Such disclosure shall be updated by the ERP on the first working day of each month. The disclosure should include a reference to the date it was last updated by the ERP, along with a reference or hyperlink to archives of previous such disclosures. 29.1.3. The websites of SEBI-registered ERPs and their....
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.... (ix) We have not been categorized as a wilful defaulter. (x) We have not been declared a fugitive economic offender. 4. We have not been declared as not 'fit and proper person' by an order of SEBI. 5. No notice to show cause has been issued for proceedings under SEBI (Intermediaries) Regulations, 2008 or under section 11(4) or section 11B of the SEBI Act during last one year against us. 6. It is hereby declared that we and each of our promoters, directors, principal officer, compliance officer and key managerial persons are not associated with vanishing companies. 7. We hereby undertake that there will not be any change in the Board of Directors of incumbent, till the time prior approval is granted. 8. We hereby undertake that pursuant to grant of prior approval by SEBI, the incumbent shall inform all the existing investors/ clients about the proposed change prior to effecting the same, in order to enable them to take informed decision regarding their continuance or otherwise with the new management. The said information is true to our knowledge. (stamped and signed by the Authorised Signatories) Annexure ....
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....scheme have been achieved. In case targets have not been achieved, provide the remedial action taken, if any. Environment Water Zero Liquid Discharge - Has the entity implemented a mechanism for Zero Liquid Discharge Environment Waste Management Extended Producer Responsibility (EPR) - Extended Producer Responsibility (EPR) is applicable to the entity's activities (Yes / No). If yes, whether the waste collection plan is in line with the Extended Producer Responsibility (EPR) plan submitted to Pollution Control Boards? Environment Land Use and Biodiversity Does the company have operations in or around ecologically sensitive areas (such as national parks, wildlife sanctuaries, biosphere reserves, wetlands, biodiversity hotspots, forests, coastal regulation zones etc.)? Environment and Social CSR Amount spent in CSR as a percentage of regulatory requirement on a look-through basis i.e. where CSR activities are undertaken by trusts / foundations, whether the funds have been actually utilized by these entities Social Inclusive development Job creation in smaller towns Social Inclusive development Percentage of input material (inp....
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....dards/ laws/guidelines for rating of Effluent/Wastewater (eg. Zero Liquid Discharge policy, Common Effluent Treatment Plants related provisions etc.) 7 ERPs should consider India specific standards/laws/guidelines for rating of Water (eg. Areas notified by the Central Ground Water Board (CGWB) as over exploited or critical area, implications of Water Act, Water Cess Act etc.) 8 All intensity ratios should be factored in after adjusting for PPP Annexure 4 Financial sector regulators/ authorities 1. Securities and Exchange Board of India 2. Reserve Bank of India 3. Insurance Regulatory and Development Authority of India 4. Pension Fund Regulatory and Development Authority 5. International Financial Services Centre Authority ^[10] Annexure 5^[11] Standard Format for Rated Entity / Issuer's Comments on the Rating Report - For ERPs following Subscriber Pays business model Subject: Comments on the Rating Report for [Name of the Rated Entity / Instrument] Reference: 1. Date of Rating Rationale 2. Rating assigned: [Insert Rating] Specific Comments on the ESG Rating Rationale (only in case the rated entity wants a clarification....
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....roprietary nature of methodology, benchmarks and criteria) • Methodology and Criteria Application: Reference to the published methodology and criteria document on ERP website. 3. Format of Response: Provide a structured, written response addressing concerns raised by the rated entity 4. Confidentiality: The ERP following a subscriber-pay model will not disclose: • Details of proprietary rating models, algorithms, or weighting mechanisms • Internal deliberations or communications during the rating process • Benchmarks, Peer data or comparisons that could compromise confidentiality Further, it to be noted that the ERPs will endeavour to address the queries raised by rated entities on a best effort basis, while maintaining confidentiality of the rating process and methodology. 5. Timeline to respond (Applicable to ERPs following subscriber-pays business model): The rated entity shall respond with a single consolidated response within two working days from the date of receipt of rating rationale. This response should be addressed to the specific email ID, as disclosed by the ERP on its website. Annexure 6 Fo....
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....bsp; *Will cover only rating changes. Reaffirmations shall be excluded Annexure 9 History of all outstanding ESG ratings History of ESG rating of all Outstanding Securities S.No Name of the Issuer Sector Type of security if applicable Listing Status (Listed/Proposed to be listed) Initial Rating Date of Initial Rating Rating after 1st Revision Date of 1st Revision Rating after 2nd Revision Date of 2nd Revision Current Outstanding Rating Annexure 10 Average one-year transition rates for ESG ratings for the last 3-Financial Year Period Rating Category 100-90 89-80 79-70 69-60 59-50 49-40 39-30 29-20 19-10 9-0 100-90 89-80 79-70 69-60 59-50 &nb....
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.... 2.1 The ERP shall make an assessment of outsourcing risk which depends on several factors, including the scope and materiality of the outsourced activity, etc. The factors that could help in considering materiality in a risk management programme include- a) The impact of failure of a third party to adequately perform the activity on the financial, reputational and operational performance of the ERP and on the investors / clients; b) Ability of the ERP to cope up with the work, in case of non-performance or failure by a third party by having suitable back-up arrangements; c) Regulatory status of the third party, including its fitness and probity status; d) Situations involving conflict of interest between the ERP and the third party and the measures put in place by the ERP to address such potential conflicts, etc. 2.2 While there shall not be any prohibition on a group entity / associate of the ERP to act as the third party, systems shall be put in place to have an arm's length distance between the ERP and the third party in terms of infrastructure, manpower, decision-making, record keeping, etc. for avoidance of potential conflict of int....
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....ce in the selection of the third party to ensure that the third party has the ability and capacity to undertake the provision of the service effectively. 4.2 The due diligence undertaken by an ERP shall include assessment of: a) third party's resources and capabilities, including financial soundness, to perform the outsourcing work within the timelines fixed; b) compatibility of the practices and systems of the third party with the ERP's requirements and objectives; c) market feedback of the prospective third party's business reputation and track record of their services rendered in the past; d) level of concentration of the outsourced arrangements with a single third party; and e) the environment of the foreign country where the third party is located. 5. Outsourcing relationships shall be governed by written contracts / agreements / terms and conditions (as deemed appropriate) {hereinafter referred to as "contract"} that clearly describe all material aspects of the outsourcing arrangement, including the rights, responsibilities and expectations of the parties to the contract, client confidentiality issues, termination....
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....nd agreement covenants and jurisdictional covenants that provide for adjudication of disputes between the parties under the laws of a specific jurisdiction; I) neither prevents nor impedes the ERP from meeting its respective regulatory obligations, nor the regulator from exercising its regulatory powers; and m) provides for the ERP and /or the regulator or the persons authorized by it to have the ability to inspect, access all books, records and information relevant to the outsourced activity with the third party. 6. The ERP and its third parties shall establish and maintain contingency plans, including a plan for disaster recovery and periodic testing of backup facilities. 6.1 Specific contingency plans shall be separately developed for each outsourcing arrangement, as is done in individual business lines. 6.2 ERP shall take appropriate steps to assess and address the potential consequence of a business disruption or other problems at the third party level. Notably, it shall consider contingency plans at the third party; co- ordination of contingency plans at both the ERP and the third party; and contingency plans of the ERP in the event of non-performan....
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....activities under IFSCA 3. SEBI/HO/DDHS/DDHS-POD-3/P/CIR/2025/007 dated January 17, 2025 Timeline for Review of ESG Rating pursuant to occurrence of 'Material Events' 4. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 Clarificatory and Procedural changes to aid and strengthen ESG Rating Providers (ERPs) [1] Circular No. SEBI/HO/DDHS/DDHS-POD3/P/CIR/2024/103 dated July 19, 2024 [2] Circular No. SEBI/HO/DDHS/DDHS-POD-3/P/CIR/2025/007 dated January 17, 2025 [3] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 [4] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 [5] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 [6] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 [7] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 [8] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 [9] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/59 dated April 29, 2025 [10] Circular No. SEBI/HO/DDHS/DDHS-POD-3/P/CIR/2025/103 dated July 19, 2024 [11] Circular No. SEBI/HO/DDHS/DDHS-POD-2/P/CIR/2025/....
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....in industries or geographical areas benefitting from more coverage than others, thereby leading to gaps for investors seeking to follow certain investment strategies; . there may be concerns about the management of conflicts of interest where the ESG ratings and data products provider or an entity closely associated with the provider performs consulting services for companies that are the subject of these ESG ratings or data products; and · better communication with companies that are the subject of ESG ratings or data products was identified as an area meriting further attention given the importance of ensuring the ESG ratings or other data products are based on sound information. IOSCO issued a Consultation Report on 26 July 2021 which explored these developments and challenges and sought to better understand the implications of the increasingly important role of ESG ratings and data products for financial markets. 2 It did so by identifying potential areas for improvement within this part of the sustainable finance ecosystem, which in turn form the basis for a series of proposed recommendations for securities markets regulators as well as ESG ratings and data product....
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.... quality ratings and data products, including publicly disclosed data sources, defined methodologies, management of conflicts of interest, high levels of transparency, and handling confidential information. The recommendations also suggest that users of ESG ratings and data products could consider conducting due diligence on the ESG ratings and data products that they use within their internal processes. The recommendations close with suggestions that ESG ratings and data products providers, and entities subject to assessment by ESG ratings and data products providers could consider to improve information gathering processes, disclosures and communication between providers and entities subject to assessment. 2 Introduction Background IOSCO has established a Board-level Sustainable Finance Task Force (STF), with the aim of: (i) improving sustainability-related disclosures made by issuers and asset managers; (ii) collaborating with other international organisations to avoid duplicative efforts and enhance coordination of relevant regulatory and supervisory approaches; and (iii) preparing case studies and analyses of transparency, investor protection and other relevant iss....
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....ttp://www.opimas.com/research/547/detail/ 3 development in contrast to financial reporting.5 This currently makes it difficult for investors to assess ESG performance and risk management based on standardised criteria; hence their inclination to use ESG ratings and data products from private providers. Transparency in ESG ratings and data methodologies is paramount, particularly as these methodologies vary significantly in terms of the ESG topics they cover, how these topics are weighted, and the metrics used to measure ESG performance. Given that the activities of ESG ratings and data products providers are not generally subject to regulatory oversight at the moment, increasing reliance on these services raises concerns about the potential risks they pose to investor protection, the transparency and efficiency of markets, risk pricing, and capital allocation. In addition, the lack of standards in this area may present the risk of greenwashing or misallocation of assets and could lead to a lack of trust in ESG ratings or in the data products' robustness or relevance. To better understand this part of the sustainable finance ecosystem, IOSCO conducted a fact- finding exe....
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.... 4 IOSCO recognises that individual jurisdictions have different domestic arrangements for adopting, applying or otherwise availing themselves of international standards. It will be important for individual jurisdictions to consider how the common global baseline of standards can be adopted, applied or utilised within the context of these arrangements and wider legal and regulatory frameworks in a way that promotes consistent and comparable sustainability disclosures across jurisdictions. IOSCO has strongly encouraged the ISSB to leverage existing sustainability-related reporting principles, frameworks and guidance, including the Task Force on Climate-related Financial Disclosures Framework (TCFD Framework), as it develops investor-oriented standards focused on enterprise value, beginning with climate change. Prior to launching the ISSB, the IFRS Foundation trustees convened a working group to develop recommendations to give the new board a 'running start'. Consistent with IOSCO's vision, this technical readiness work leveraged the TCFD Framework and other content from existing sustainability reporting organisations. IOSCO has encouraged a 'building blocks' approach to est....
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....ta products. It outlines the types of firms that act as ESG ratings and data products providers before providing an overview of some of the current products available to financial market participants. Scoping of industry In a rapidly moving and diversified market, and in the absence of global standards for this industry, developing an overview of the market for ESG ratings and data products providers is challenging. While steps have been carried out to map existing providers and products in some jurisdictions, the mapping is only partial.8 Nonetheless, KPMG estimates that there are 160 ESG ratings and data products providers worldwide.9 These include both for-profit and non- profit companies that offer large or specialised ESG-related products. At a regional level, a report recently prepared for the European Commission (EC) identified 30 to 40 other smaller providers of ESG ratings, data and research products and services domiciled in the European Union (EU), although such data is harder to find in other jurisdictions.10 From a revenue perspective, according to a recent study by UBS, global revenues generated by ESG data and services could more than double by 2025.11 Produ....
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....le 1) and/or have invested significant resources to develop their own ESG expertise/capacities. However, where consolidations have occurred, only a few companies appear to have been fully integrated into the acquiring company, with the vast majority of acquired companies retaining their legal status by becoming a subsidiary of the acquiring entity. Table 1: Examples of recent mergers and acquisitions in the ESG ratings and data provision market. Year Target Acquirer 2016 Trucost (UK) S&P Global (US) 2017 Sustainalytics (Netherlands) - acquisition of a 40% stake Morningstar (US) South Pole (Switzerland) (Investment Climate Data Division) ISS (US) 2018 Solaron (India) Sustainalytics (Netherlands) Oekom (Germany) ISS (US) (acquired in 2020 by Deutsche Börse Group) 2019 Vigeo-Eiris (France) Moody's Corp (US) Beyond Ratings (France) London Stock Exchange (UK) Four Twenty Seven (US) Moody's Corp (US) GES International (Sweden) Sustainalytics (Netherlands) Carbon Delta (Switzerland) MSCI (US) SynTao Green Finance (China) - minority stake Moody's Corp (US) Ethical Corp (US) Thomson Reuters (US) Robecosam AG-ESG ratings Business (Swit....
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....lity factors including contribution to climate change mitigation and adaptation. 5 Sustainable Development Goals (SDG) Assessments: Measures a company's level of contribution across the SDGs through their products & services and business behaviour 6 UN Global Compact Assessment: Normative framework assessment of a company's capacity to manage ESG responsibilities outlined by the UN Global Compact 7 Corporate ESG Assessments and Scores: Scores a company's capacity to manage ESG factors as defined by international standards. Scores include scores for 28 ESG drivers, an E, S, G and a composite ESG score, derived from public information 8 Sovereign ESG Assessments and Scores: Scores a Sovereign entity's performance on 172 ESG risk and performance indicators 9 Sustainability Ratings: Analysis of a company's multi-stakeholder impact taking into account performance under dual materiality considerations. The sustainability rating includes a company's risk exposure to ESG factors, their management of ESG factors and their ESG impact (positive) 10 ESG Benchmark Analysis: Customised peer benchmarking for a company including ESG assessment ranking and best practice insights ....
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....reenhouse gas ("GHG") information. 3 Controversial Weapons Screening Helps investors make decisions regarding companies directly or indirectly involved in the development, production, maintenance or sale of controversial weapons including, but not limited to, biological and chemical weapons, nuclear weapons, anti-personnel mines, and cluster munitions. 4 Energy & Extractives Screening Assesses companies' involvement in the extraction of fossil fuels and the generation of power from fossil fuel, nuclear and renewable sources. 5 E&S Disclosure Quality Score Measures and identifies companies' environmental, social and governance disclosure practices with data-driven scoring and screening solutions. 6 Global Sanctions Screening Assesses companies with ties to jurisdictions of concern and/or jurisdictions under UN United States (US) or EU sanctions. 7 Norm-Based Research Assesses companies' adherence to international norms on human rights, labour standards, environmental protection and anti-corruption as set out in the UN Global Compact and the Organisation for Economic Cooperation and Development (OECD) Guidelines. 8 Pooled Engagement A dialogue and engagement service....
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....he broad spectrum of rating products in sustainable finance and include ESG scorings and ESG rankings.13 ESG ratings, rankings and scorings serve the same objective, namely the assessment of an entity, an instrument or an issuer exposure to ESG risks and/or opportunities. However, they differ in the resources and methodologies used. ESG scores usually result from quantitative analysis whereas ESG ratings are produced using both quantitative models and qualitative analysis and are accompanied by analyst reports to explain the ratings. On that basis, ratings may therefore incorporate an element of analytical judgement or opinion. Ratings providers select key issues for each ESG component and assess the exposure to these sustainability risks and the way in which they are managed. ESG ratings, scorings, and rankings are usually not defined in absolute terms (although some are14) but are generally assessments relative to a peer group. ESG data products ESG data products providers have developed a wide range of products and services in order to meet investors' growing demand for ESG-related information. Feedback from providers suggests the potential for innovation remains high. . C....
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.... companies over SMEs. This is perhaps unsurprising given that ratings providers rely on public disclosures (and other information) for their analysis. In addition, from a demand perspective, the clients of ESG ratings and data products providers are more likely to invest in publicly listed companies. Table 4: Example Statements Provided by Stakeholders During IOSCO Fact-Finding Exercise ESG ratings/data coverage can depend on sophistication of financial market The individual ESG scores are geographically diverse across developed markets with higher coverage in well-developed markets as data disclosure increases. Coverage of private unlisted companies less systematic than publicly listed companies There is [thus] no systematic coverage of private unlisted companies, as there is with publicly listed companies. Two main reasons for this difference appear: • ESG demand in these asset classes is relatively new and there is yet to be sufficient demand for a systematic coverage, · Unlisted private companies face fewer obligations in regard to ESG disclosure: direct dialogue appears necessary to gather (de facto internal) information and as such implies a mandate....
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....ovided by Stakeholders During IOSCO Fact-Finding Exercise Comparison of the most common ESG data products used by clients of two ESG [ratings and] data products providers · ESG Scores • Sector-Based Screening · Daily Monitoring and Alerts · Norm-Based Research (NBR) and · Corporate Physical Climate Risk Sovereign NBR Scores · Controversial Weapons Research · Corporate Transition Risk Scores • Climate Solutions · Controversial Activity Screening Variations in geographic preferences Across providers, the popularity of ESG ratings and data products can vary by geographic region, and in some cases, vary within individual jurisdictions. For example, a number of ESG data products providers highlighted that demand for their data products was higher in jurisdictions with a higher level of legislative and regulatory or client focus on ESG investing, namely Europe and the US. Furthermore, within Europe, there was a noted preference for certain products in particular countries. To some extent, these preferences can be seen as a combination of investor demand and regulatory requirements, where all jurisdictions have a general level of....
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....ars, several ESG ratings providers have published high level ESG ratings of companies on their websites without any paywall. 15 A market which is largely unregulated ESG ratings and data products are at an early stage of adoption by financial market participants, although their usage and role are growing rapidly. Consequently, the market remains largely unregulated, with some isolated attempts at self-regulation through codes of conduct. A number of voices (national regulators, 16 industry associations,17 as well as providers themselves) have called for a regulation of the market. IOSCO considered the existence of regulatory requirements or voluntary standards in members' jurisdictions. These could provide a real-world example of regulatory or standard setting requirements for these activities or indicate where there may be potential for overlap or conflict with any of IOSCO's proposed recommendations. IOSCO took a bottom-up approach to this scoping exercise, asking the ESG ratings and data products providers whether they were subject to any supervisory or regulatory frameworks. The feedback received identified only a limited number of national regulatory frameworks applic....
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....tidimensional nature of evaluating sustainability performance without losing ability to identify red flags (3) give users transparent access to more complex, granular information and scoring decisions while still aggregating in a way that advances our core principles (e.g., to reward good relative and absolute performance, good disclosure, quantitative reporting and consistent performance across dimensions). Some jurisdictions are currently developing frameworks for regulating ESG ratings and data products providers. For example, the EC announced it is investigating the market for sustainability ratings and research as part of its 2018 Action plan for sustainable finance. Subsequently, the EC published its Strategy for Financing the Transition to a Sustainable Economy in which it outlined that it would take action to improve the reliability and comparability of ESG ratings and further assess certain aspects of ESG research, to decide on whether an intervention is necessary.20 In the UK, in 2021 the Financial Conduct Authority ("FCA") published a discussion chapter seeking feedback on certain ESG issues in capital markets, including the currently unregulated field of ESG data ....
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....e through the creation of an ISSB under the IFRS Foundation. As such, in some cases, the information on which ESG ratings and data products are based will be sourced from external entities and third parties, or approximated using internal metrics. Irrespective of how the information is sourced, the quality, reliability, and consistency of this information is an important consideration. Table 9: Measurement Objectives of Selected ESG ratings Example statements Provided by Stakeholders During IOSCO Fact-Finding Exercise Differences in ESG ratings Measurement Objectives ESG ratings Provider 1 ESG ratings Provider 2 Our Sustainability Ratings consider issuers' multi- stakeholder impact, considering the identification and management of material ESG risks and opportunities and the ability to create long-term value. [ESG ratings Provider 2]'s Ratings aim to measure a company's resilience to long-term financially relevant ESG risks on following aspects: • Of the negative externalities that companies in an industry generate, which issues may ESG ratings can be based on publicly available information only, proprietary information, subscription-based services and infor....
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....aying field for both providers and entities that are the subject of these ratings or data products. Table 10: Example Statements Provided by Stakeholders During IOSCO Fact-Finding Exercise Collection of ESG data hampered by multiple factors Low Volume of ESG Information In certain regions and asset classes the total volume of ESG and Climate information (qualitative and quantitative) that is disclosed remains low. Specifically, we see lower volumes of disclosures in Emerging Markets and in the Asia Pacific region. ESG Reporting Fragmentation It is not uncommon to see ESG data and climate information spread across multiple reports (Annual Report, CSR Report, specific website pages or 'deep dives' etc.). That is not negative per se, as we recognize that this information is of interest to multiple parties. However, consolidation within one primary document, a main section of a report, or a main section of a website would reduce the risk of lost information indicators on whether or how progress is being made against the policies. Issues with Supporting Information for Targets Where targets are set on ESG or Climate issues, we observe that baselines are not always m....
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....ckage, without the ability to understand the underlying data inputs and methodological approach, the investor may not be able to make an informed choice between product offerings. It is useful to note that ESG ratings providers are increasingly providing their high level ESG scores on their websites for public access. On that basis, smaller investors would still have access to some ESG ratings as well as to the sustainability-related disclosures of listed companies. Finally, the "subscriber pays" model potentially creates pressure for the provider to prioritise quantity of information over quality of information. Indeed, users of ESG ratings and data products will seek access to broad coverage across geographies and sectors, possibly putting pressure on the provider to deliver this coverage even where availability and robustness of underlying data are not sufficient or lead to declining overall quality of analysis. 23 IOSCO press release dated 24 February 2021, available at: https://www.iosco.org/news/pdf/IOSCONEWS594.pdf 18 Table 11: Example Statements Provided by Stakeholders During IOSCO Fact-Finding Exercise ESG data fee's model is predominantly "subscriber pa....
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....diverse, which, when combined with issues regarding the availability, quality and comparability of ESG data, can result in low correlation and high divergence in ESG ratings and data products between providers even where products are aiming to address the same objective.24 24 Berg, F., J. F. Koelbel, and R. Rigobon (2020): "Aggregate Confusion: The Divergence of ESG ratings", MIT Sloan School Working Paper; Christensen D., G. Serafeim and A. Sikochi (2019): "Why is corporate virtue in the eye of the beholder? The case of ESG ratings," Harvard Business School Working Paper; Chatterji K., R. Durand, D. I. Levine, and S. Touboul (2016): "Do ratings of firms converge? Implications for managers, investors and strategy researchers", Strategic Management Journal; Kotsantonis S. and G. Serafeim (2019): "Four Things No One Will Tell You About ESG Data", Journal of Applied Corporate Finance. 19 A recent report by the OECD describes some of these differences in methodologies among providers: 25 · Data may be collected according to methods specific to each provider and can result in the combination of information from a variety of sources: o Information publicly reported by c....
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.... 20 Use of sector-specific methodologies ESG ratings and data products providers predominantly use sector-specific methodologies and risk assessments, rather than one single methodology that is applied to all entities that are the subject of these ratings or data products. A large majority of fact-finding respondents indicated that they use both general and sectoral metrics in their assessments, weighting them in different ways depending on the final product. For example, the vast majority of ESG ratings and data products providers use a standard set of "universal ESG metrics/measurements" from a cross- sectoral approach, complemented by more ad-hoc metrics, depending on either the industry in which the assessed entity is active, its geographic location, or its size. In addition, the nature of the indicators or criteria used might depend on which ESG criteria is applied. For example, there seems to be a general level of consensus with respect to governance (G) criteria, which tend to include a more limited set of metrics that are considered relevant regardless of the size or sector of the entity subject to assessment. In contrast, the social (S) and environmental (E) crit....
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.... collection processes, therefore freeing human resources for more valuable tasks such as analysis, making recommendations and determining outcomes. 21 While AI and ML have a role in simplifying the data compilation process, other uses have also been observed. These include using AI and ML techniques for the purpose of assessing sentiment and behaviour of the market towards key ESG issues, or to provide estimates of historical carbon emissions. Table 13: Example Statements Provided by Stakeholders During IOSCO Fact-Finding Exercise Use of artificial intelligence and machine learning techniques evidenced but still at early stage In recent years, we have been utilizing Natural Language Processing to a greater degree, which improves efficiency in data extraction and enables us to cast a wider net when processing news and media data sources. With the increase in ESG data requirements and with more companies and third parties reporting relevant data, we are collecting more data points for more companies now than 2 years ago. Machine Learning and Natural Language Processing capability helps us tackle increased volume and scope of publicly available data. Please note that the t....
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....point, as is the case for GHG emissions inventories. For climate data (emission reported) used in our climate offerings there is also a plausibility check. If data is not deemed plausible, it is estimated instead. 22 Benchmarking against other providers A final methodology question was the extent to which ESG ratings and data products providers benchmark the performance of their products against those of other ESG ratings and data products providers. Here, respondents were unanimous in stating that they did not compare their own analyses with those of their competitors. In some respects, this is a positive aspect of market behaviour and indicates that providers' assessments are not influenced by a desire to coalesce around a common market view. However, there is also likely a practical reason for this, in so far as if their methodologies and products are inherently different, are not disclosed, or have different measurement objectives, then benchmarking is not feasible. Table 15: Example Statements Provided by Stakeholders During IOSCO Fact-Finding Exercise Use of benchmarking against other providers [ESG ratings and data products provider] does not directly compa....
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....isks. Participants were asked about how ESG ratings are incorporated into their investment decisions or other perspectives. Most respondents indicated that ESG ratings are generally incorporated into investment decisions but did not describe how ESG ratings are used in investment decision-making processes. Some institutions noted that ESG ratings are not systematically 24 included in all investment decisions, but rather that ESG ratings are used to reinforce internal analyses and investment decisions by helping to identify risks and opportunities. As for ESG data products, views provided during the fact-finding exercise were to some extent different from those on ESG ratings. The responses highlighted that slightly more participants use ESG data products than ESG ratings. Managing sustainability risks or opportunities was a common objective, however, broader objectives including negative screening, the development of sustainable product offerings and regulatory reporting were mentioned. Some asset management firms indicated that they mainly use ESG data for environmental analysis such as monitoring the alignment of investment portfolios to the Paris Agreement. Most r....
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....ucts providers on an ad-hoc basis when they observe an inconsistency between the ESG ratings or ESG data products and their own analysis. However, it is noted that all public users, and some private users, responded that they do not 25 implement verification processes on raw ESG data underlying ESG ratings or ESG data products because such processes are resource intensive and may not be possible with available information. The fact-finding exercise indicated that there are generally similar factors impacting reliability of ESG ratings and ESG data products. Most organisations pointed out the lack of transparency of methodologies including aspects such as the scope of the underlying data, definitions of materiality, the timing of data collection and the frequency of review or update of the ESG ratings or ESG data products. Of note, one respondent mentioned that the evaluation criteria of ESG ratings and data products are a "black box" and whilst it should be transparent, the models used could be confidential to the extent that they are considered to be intellectual property developed by ESG ratings and data products providers. With regard to the underlying ESG data, the ....
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....ative judgement exercised by the ESG ratings or data provider. 26 External ESG ratings vs internal ESG ratings One key takeaway from the roundtable is that the lack of transparency around external ESG rating methodologies is a key factor in encouraging users to build proprietary rating methodologies. IOSCO's questionnaire revealed that almost all large asset managers are using or currently developing their own ESG ratings to supplement, or form part of their investment processes. Most respondents argued that the wholesale adoption of third party ESG ratings and their methodologies might not align with their investment strategies, although a minority of respondents indicated that using external ESG ratings could save them time with regards to their own analyses. Most asset managers tend to develop internal ESG rating systems customised to their specific investment strategies and philosophies. One example of developing internal ESG ratings is to identify ESG criteria that are relevant for the sector(s) in which the asset manager is seeking to invest, before constructing a methodology underpinned by these criteria. Another example is to select a limited set of KPIs to be c....
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....out to a company to request information that will assist with its ESG ratings or data product, (2) data assessment, during which the ESG ratings or data products providers use all the information they gather pursuant to their methodology to determine their ESG ratings or data product, and (3) pre-publication of the final ESG ratings or data products, where the ESG ratings or data products provider may inform the company of the outcome of its assessments, and in some circumstances, provide the company with the opportunity to offer additional information which may alter the assessment. The following sections explore the challenges faced by companies in more detail. However, it is worth highlighting that, in many cases, most of the engagement between ESG ratings and data products providers and companies occurs during the data collection and the data assessment phases. Based on the feedback received during the fact-finding exercise, the engagement tends to be more limited during the pre-publication phase, and where it takes place, it often happens at the request of the companies in order to address any errors or omissions related to the use of the companies' information. i. Phase....
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....iders in making their assessments, or by investors in their decision-making process. One company noted that there are cases in which additional questions are asked without sufficient explanations or reasons from providers. In terms of providers' resources, another company pointed out that the high turnover of analysts and the need to bring them up to speed each time is a significant resource strain for companies. Table 18: Views of Companies: Data Collection · Time consuming to respond to questionnaires of differing frequency and focus. · Limited forward visibility on receipt of requests for information from providers. · Lack of explanation for questions being addressed to covered entity ii. Phase 2: Data assessment - lack of transparency of evaluation methodology Respondents to IOSCO's fact-finding exercise highlighted the lack of engagement and transparency from ESG ratings and data products providers with the companies throughout the data assessment and evaluation process. For example, as mentioned in Chapter 3, one respondent categorized the whole evaluation phase by the ESG ratings and data products providers as a "black-box" even if some aspects of ....
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....mpanies and ESG ratings and data products providers ahead of the publication of the final ESG ratings or data product report, suggesting this interaction often only took place at the request of the company themselves. Where interaction takes place, companies noted that they were sometimes asked to pay to gain access to the report. This is also seen at the post publication phase. Given the current "subscriber-pay" model, in general there is no specific incentive for the ESG ratings or data products providers to interact meaningfully with the companies. This lack of interaction leaves companies with limited opportunity to check the accuracy of the content of the final report, meaning they are unable to indicate factually incorrect or insufficient information in a timely manner. This is particularly the case where, as usually happens, investors receive the final report on the ESG ratings or data product ahead of the companies. This creates potential reputational risks for the companies, and could possibly lead to poor investment decisions on the part of the investor paying for and using ESG ratings or data products that are based on erroneous or limited information. Table 20:....
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....tings and data products providers are separating the function between ESG ratings or data products and indices to ensure their independence and transparency. IOSCO received limited information from respondents about good practices by ESG ratings and data products providers to avoid potential conflicts of interest. 31 Chapter 5: Final Recommendations Introduction Before determining whether it was appropriate for IOSCO to propose recommendations in this area, IOSCO canvassed the opinions of stakeholders to understand: (i) whether developments in the area of ESG ratings and data products providers pose risks to investor protection; (ii) whether there are already existing standards or guidance in the market for ESG ratings and data products providers; and, (iii) whether there would be value in IOSCO playing a role to provide this guidance. To receive feedback on this issue, IOSCO addressed specific questions to stakeholders during the fact-finding exercise and also included a request for further information at the consultation stage. IOSCO asked ESG ratings and data products providers to identify practical steps that could be taken to improve the usability and reliabilit....
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....uality of ESG ratings depends on the robustness of ESG ratings methodologies. Likewise, for ESG data products, data collection, frequency and verification will impact data quality. Lack of transparency on the process of developing ESG ratings and ESG data products could make it difficult for users to understand and interpret providers' outputs. Reliability of ESG ratings and data products and potential conflicts of interest To help users make more informed investment decisions, reliability of ESG ratings and data products is a key issue. This relates primarily to ESG ratings and data products providers having robust and transparent governance processes around business models and fee structures, conflicts of interest policies, and quality management systems. This could include, for instance, explicit measures to help ensure independence and separation of ESG ratings and data products and consulting services. Where ESG ratings and data products providers also receive fees related to other services such as consulting services from entities, potential conflicts of interest could arise from such interplay of services. Most respondents suggested that there should be procedures i....
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....m stakeholders for IOSCO to provide guidance that addressed a broad spectrum of ESG ratings and data products; support which also came through the responses to IOSCO's consultation report. This spectrum ranged from recommendations addressing the internal processes of the providers themselves, the uses and users of the products, as well as interactions between covered entities and the providers. On this basis, IOSCO has proceeded with recommendations addressing the key areas of concern. Overview of Recommendations Based on specific suggestions and stakeholder feedback received from the fact-finding exercise conducted by the STF, as well as the public consultation responses, this chapter sets out high- level recommendations and guidance on possible policies and procedures for meeting the objectives of the recommendations. The suggestions for policies and procedures are provided as guidance on the implementation of the goals of the high-level recommendations. They are intended to serve as illustrations for specific steps that can be voluntarily taken for each recommendation. They are intended as helpful concrete suggestions that regulators could consider as ways to address recom....
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....ays through which authorities could enable ESG ratings and data products providers to deliver high quality and independent ESG ratings and data products, whilst appropriately addressing conflicts of interest. The ESG ratings and data products market is still developing and includes a diverse range of providers and products covering for example, aggregated ESG assessments as well as analyses of individual E, S and G issues, using different approaches. This diversity of views, independent methodologies, innovation and competition can be beneficial to the markets and investors, with sufficient transparency and robust governance, calling for providers to issue ratings and data products that are internally consistent with their own disclosed in-house methodologies. The implementation of these measures could in turn contribute to a greater level of confidence in the use of these products within the financial system, supporting a greater up-take in usage while simultaneously helping to protect investors and ensure that markets are fair and efficient, in line with IOSCO objectives. However, mechanistic or over-reliance on ESG ratings or data products should be avoided. For this reason, it ....
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....blicly disclosed, including whether and how the methodologies are defining the individual components Environmental, Social, Governance of "ESG", including the specific issues being assessed, the KPIs used and measurement methodologies underlying each KPI. o Whether the providers' ESG ratings and data products are issued in a manner that is internally consistent with the relevant provider's in-house methodologies. o Whether the underlying processes and methodologies of the ESG ratings and data products are subject to the provider's written policies and procedures and/or internal controls designed to help ensure the processes and methodologies are rigorous, systematic, and applied consistently. o Whether to provide facilities for the reporting of complaints or misconduct relating, but not limited to, the independence, transparency or integrity of ESG rating or data products. > Regulators, could consider whether there are opportunities to encourage industry participants to develop and follow voluntary common industry standards or codes of conduct. IOSCO could also consider what role it can play in supporting the development of such voluntary standards or codes, regarding....
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....es where necessary, using transparent and defined methodologies. 1 ESG ratings and data products providers could consider: o adopting and implementing written policies and procedures designed to help ensure that the ESG ratings and data products they issue are based on a thorough analysis of all relevant information available to them. o adopting, implementing and providing transparency around methodologies for their ESG ratings and data products that are rigorous, systematic, applied continuously while maintaining a balance with respect to proprietary or confidential aspects of the methodologies. o for ESG ratings, publishing on a regular basis an evaluation of their methodologies against the outputs which they have been used to produce. o subjecting these methodologies to regular review, with sufficient communication regarding changes made to the methodologies as well as potential impacts of these changes to the ESG ratings and data products. o providing transparency, where reasonably possible, around the sources of data used in determining their ESG ratings and data products, including the use of any industry averages, estimations or other methodologies when a....
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....e on their ESG ratings or data product decisions. o disclosing such conflict avoidance and management measures. o taking steps to help ensure the ESG ratings and data products would not be affected by the existence of or potential for a business relationship between the ESG ratings and data products providers (or their affiliates) and any entity or any other party for which it provides ESG ratings or data products. o putting in place measures to help ensure their staff members refrain from any securities or derivatives trading presenting inherent conflicts of interest with the ESG ratings and data products. o structuring reporting lines for their staff and their compensation arrangements to eliminate or appropriately manage actual and potential conflicts of interest related 38 to their ESG ratings and data products. o not compensating or evaluating staff on the basis of the amount of revenue that an ESG rating and data products provider derives from an entity that staff provides ESG ratings and data products for, or with which staff regularly interacts regarding such ESG ratings and data products. o where consistent with confidentiality, contractual and ot....
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....ata products providers could consider adopting and implementing written policies and procedures designed to address and protect all non-public information received from or communicated to them by any entity, or its agents, related to their ESG ratings and data products, in a manner appropriate in the circumstances. ESG ratings and data products providers could consider : o adopting and implementing written policies and procedures and mechanisms related to their ESG ratings and data products designed to address and protect the non-public nature of information shared with them by entities under the terms of a confidentiality agreement or otherwise under a mutual understanding that the information is shared confidentially. o adopting and implementing written policies and procedures designed to address the use of non-public information only for purposes related to their ESG ratings and data products or otherwise in accordance with their confidentiality arrangements with the entity. o including information on data confidentiality management and on the protection of non-public information to the extent terms of engagement are published. 5.3 Recommendations for market parti....
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....ctions with entities covered by ESG ratings and data products. For ESG rating and data providers this means providing greater forward visibility to covered entities as to what to expect from their assessment processes. An example of how this can be addressed could be the introduction of "Terms of Engagement" that are agreed upon between ESG ratings and data product providers and the covered entities. These terms of engagement could provide covered entities with visibility on the assessment process, when data is likely to be requested and how it will be treated by the ESG rating and data provider. Recommendation 8: ESG ratings and data products providers could consider improving information gathering processes with entities covered by their products in a manner that leads to more efficient information procurement for both the providers and these entities. Recommendation 9: Where feasible and appropriate, ESG ratings and data products providers could consider responding to and addressing issues flagged by entities covered by their ESG ratings and data products while maintaining the objectivity of these products. > Where they collect information from covered entities on a bil....
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....SCO, through WS1, has engaged with the IFRS Foundation as the IFRS Foundation has worked towards the establishment of an ISSB. IOSCO considers that the newly launched ISSB can deliver a global baseline for investor-oriented sustainability-related disclosure standards focussed on enterprise value creation, which jurisdictions could consider incorporating or building upon as part of their mandatory reporting requirements as appropriate and consistent with their domestic legal frameworks. These efforts by WS1 are intended to drive much-needed international consistency and comparability in sustainability-related information. In turn, this information could become an essential part of any methodology underpinning the development of ESG ratings or data products.29 Recommendation 10: Entities subject to assessment by ESG ratings and data products providers could consider streamlining their disclosure processes for sustainability related information to the extent possible, bearing in mind jurisdictions' applicable regulatory and other legal requirements. > Entities subject to assessment by ESG ratings and data products providers could consider: o creating a dedicated section of th....
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.... refer to the broad spectrum of ratings products that are marketed as providing an opinion regarding an entity a financial instrument or a product, a company's ESG profile or characteristics or exposure to ESG, climatic or environmental risks or impact on society and the environment that are issued using a defined ranking system of rating categories, whether or not these are explicitly labelled as "ESG ratings". In addition to assessing whether there is a common terminology for the products that are offered in this market, IOSCO has sought to understand if there is a common understanding of the attributes that these products are intended to measure. The starting point was to assess whether there is a common understanding of the terms "ESG factors" and "ESG risks" among market participants and, in this context, what it meant from an investment decision-making perspective. Respondents suggested that there is no such common understanding in the market, that is, no systematic and consistent approach to assess risk stemming from ESG factors. As such, what these terms mean from an investment decision- making perspective varied by geographical regions or areas of specialisation. ....
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.... of their investment products · IFRS Foundation refers to International Financial Reporting Standards Foundation. A not-for-profit, public interest organization established to develop a single set of high- quality, understandable, enforceable and globally accepted accounting standards- - IFRS Standards-and to promote and facilitate adoption of the standards. IFRS Standards are set by the IFRS Foundation's standard-setting body, the IASB. · ISSB refers to International Sustainability Standards Board. An independent group of experts with an appropriate mix of recent practical experience in setting accounting standards, in preparing, auditing, or using financial reports, and in accounting education. Broad geographical diversity is also required. Board members are responsible for the development and publication of IFRS Standards, including the IFRS for SMEs Standard. The Board is also responsible for approving Interpretations of IFRS Standards as developed by the IFRS Interpretations Committee (formerly IFRIC). Members are appointed by the Trustees of the IFRS Foundation through an open and rigorous process that includes advertising vacancies and consulting relevant organis....
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.... their ESG ratings and data products, in a manner appropriate in the circumstances. Recommendation 7: Market participants could consider conducting due diligence or gathering and reviewing information on the ESG ratings and data products that they use in their internal processes. This due diligence or information gathering and review could include an understanding of what is being rated or assessed by the product, how it is being rated or assessed and, limitations and the purposes for which the product is being used. Recommendation 8: ESG ratings and data products providers could consider improving information gathering processes with entities covered by their products in a manner that leads to more efficient information procurement for both the providers and these entities. Recommendation 9: Where feasible and appropriate, ESG ratings and data products providers could consider responding to and addressing issues flagged by entities covered by their ESG ratings and data products while maintaining the objectivity of these products. 46 Recommendation 10: Entities subject to assessment by ESG ratings and data products providers could consider streamlining their disclosu....
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.... grateful for the responses and has taken them into consideration when preparing this final report. The rest of this section summarises the replies received to the proposed recommendations and consultation questions. Overall, respondents were supportive of IOSCO's work and were broadly in agreement with the proposed recommendations set out in the Consultation Report; although they provided further suggestions to the underlying text explaining how the recommendations could practically be implemented. Proposed Recommendations for IOSCO and IOSCO Members concerning ESG ratings and data products (Recommendation 1) as set out in the Consultation Report. Recommendation 1: Regulators may wish to consider focusing more attention on the use of ESG ratings and data products and ESG ratings and data products providers in their jurisdictions. Most of the respondents were supportive of this recommendation and encouraged the development of regulatory framework or code for ESG ratings and data product providers. 49 There was overall agreement over the fact that such a framework should contain elements such as the avoidance of conflicts of interest, transparency on underlying method....
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....he implementation of this recommendation, suggesting it may not always be appropriate to provide data sources where these stem from proprietary information. A number of commenters raised a concern that there was a call for standardized methodologies, consistent across the industry, which could be detrimental in the developing ESG market. In respect of validation, some respondents mentioned that, statistical validation can be difficult and the recommendation should instead focus on promoting the publication of ESG performance reviews by the provider. On the element of 'sufficient resources to carry out high- quality ESG-related assessments', one respondent proposed spelling out that there should be sufficient resources for quality assurance of ratings provided. 50 IOSCO's response: IOSCO welcomes respondents' overall support for the recommendation. We take on board comments about the need to be balanced in expectations on transparency and have made some minor amendments to the underlying guidance. We have added an explicit note that the focus is on transparency and internal consistency. As such, there is no call for standardized methodologies, consistent across the industry....
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....dicated that information disclosed by rating agencies should be of sufficient quality to allow stakeholders to have a reasonable sense of what the rating was intending to measure and how they approached this measurement. They however suggested a balance needs to be struck between what information ESG ratings and data products providers are willing to publish, given the commercial proprietary nature of methodologies, and the usefulness of that information. IOSCO's response: IOSCO has made some amendments to the recommendation, to clarify that disclosures should be sufficiently detailed to enable the users of the product to understand what the product is and how it is produced, including any potential conflicts of interest. Within the 51 guidance, we also encourage ESG ratings and data product providers to be transparent about how and when they will typically engage with a rated entity. We also added a note that there should be a balance between disclosure of methodologies and data, and preservation of proprietary or confidential information. Recommendation 6: ESG ratings and data products providers could consider maintaining in confidence all non-public information commu....
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....pose, at this stage, to go into the level of detail proposed by some respondents with regard to due diligence; noting that existing regulatory frameworks may already cover some of these aspects. 52 Proposed Recommendation on how ESG ratings and data products providers could consider interacting with entities subject to assessment (Recommendations 8-9) as set out in the Consultation Report. Recommendation 8: ESG ratings and data products providers could consider improving information gathering processes with entities covered by their products in a manner that is efficient and leads to more effective outcomes for both the providers and these entities Recommendation 9: ESG ratings and data products providers could consider responding to and addressing issues flagged by entities covered by their ESG ratings and data products while maintaining the objectivity of these products Most respondents were in favour of these recommendations. They emphasised the significance of the interaction between companies and rating providers in obtaining reliable data. They pointed out that it is the more efficient and effective way to assess an organisation's ESG performance and encouraged....
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..... BACKGROUND IOSCO is committed to supporting the transition to a more sustainable economic model for capital markets. Notably, IOSCO has focused its efforts on addressing the growing risk of greenwashing in order to mitigate the investor protection concerns that greenwashing raises. These efforts are important since greenwashing has the potential to severely undermine investor confidence in sustainable finance and threaten efforts to combat climate change. In November 2021, IOSCO published two reports addressing greenwashing in two areas of critical importance in sustainable finance. The Report on Sustainability-related Practices, Policies, Procedures, and Disclosures in Asset Management industry2 lays down a series of recommendations for asset managers covering regulatory and supervisory expectations for asset managers; related disclosure both at the firm and product levels; terminology; and financial and investor education. The Report on Environmental, Social and Governance (ESG) Ratings and Data Products Providers3 explores the developments and challenges related to the use of ESG ratings and data products and seeks to better understand the implications of the increasi....
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....ood governance of ESG ratings and data providers would together provide investors with internationally consistent and comparable sustainability-related information, which would help prevent greenwashing and foster investor confidence in sustainable finance. On the regulatory front, jurisdictions have started to establish or build upon existing regulatory frameworks for the regulation of asset managers and the use of ESG ratings and data in the context of sustainable finance. It is therefore critical that asset managers now push forward to improve sustainability-related practices, policies, procedures, and disclosure in their industry and that ESG ratings and data providers improve the reliability, comparability, and interpretability of their ESG ratings and data products. III. THE IOSCO GOOD PRACTICES Based on the aforementioned recommendations, IOSCO has prepared this Good Sustainable Finance Practices Call for Action ('IOSCO Good Practices') which covers both asset managers and ESG ratings and data providers. The IOSCO Good Practices are voluntary and are not intended to conflict with national or regional legal and regulatory frameworks. The IOSCO Good Practices in Se....
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....cifically, the practices, policies, and procedures relating to material sustainability-related risks and opportunities and the disclosure thereof should cover the following areas, as detailed by the Task Force on Climate-related Financial Disclosures (TCFD) and further elaborated by ISSB standards: · Governance: The asset manager's governance around material sustainability-related risks and opportunities. · Investment strategy: How material sustainability-related risks and opportunities are factored into the asset manager's investment strategies and investment process, including, where relevant, the data and methodologies used. · Risk management: How the asset manager identifies, assesses, and manages material sustainability- related risks and opportunities. · Metrics and targets: The metrics and targets used to assess and manage relevant material sustainability-related risks and opportunities where such information is material. The disclosure may also cover any firm-level commitments to other international or regional sustainability-related initiatives and any relevant signatory reports, where appropriate. GP2: Clear expectations regarding product-lev....
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....ies (including where to access those policies); and (b) past proxy voting and shareholder engagement records (which should include disclosure about how the past proxy voting and shareholder engagements records align with and help advance the sustainability-related investment objectives or characteristics of the sustainability-related product). · Risk disclosure: Practices regarding disclosure in product offering documents about: (a) material risks and opportunities by sustainability-related products, including any unique risks and opportunities that arise from a product's focus on sustainability; and (b) material sustainability- related risks by all products. Risk disclosure by sustainability-related products addresses the disclosure of all material risks and opportunities associated with investing in the specific sustainability-related product and enables investors to better understand the potential risks and opportunities associated with the product. This type of risk disclosure could include any unique risks that arise from a product's focus on sustainability, such as concentration in certain types of investments and reliance on third-party providers for sustainability-rel....
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....g., ESG integration, negative screening, best-in-class) and definitions of commonly used sustainability-related terms such as "green". 5 The sustainability impact of a sustainability-related product's portfolio refers to the effect of the product's portfolio holdings on environmental, social and/or governance issues. 4 OICU-IOSCO While there are existing initiatives in different jurisdictions addressing the issue of what is "sustainable" or "green", for example, there is a particular need for the development of common terms and definitions for ESG approaches. GP4: Promoting or participating in financial and investor education initiatives relating to sustainability. Financial and investor education initiatives may include promoting sustainability-related risk awareness and improving investor comprehension about, and enhancing transparency of sustainability-related products, which would improve comparability and informed decision-making as well as prevent greenwashing. In emerging markets, such initiatives may also promote the importance of sustainable finance and expand the market for sustainability-related products. Financial education initiatives may also addr....
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....his Call for Action, the term methodologies could include inter alia, (i) attributes being assessed, (ii) indicators used to measure the attribute, and (iii) weighting of the relevance of each attribute to the final rating. 5 OICU-IOSCO GP2: Adopting and implementing written policies and procedures designed to help ensure that their decisions are independent, free from political or economic interference, and appropriately address potential conflicts of interest. GP3: Identifying, avoiding, or appropriately managing, mitigating, and disclosing potential conflicts of interest. GP4: Making adequate levels of public disclosure and transparency a priority for their ESG ratings and data products, including their methodologies and processes. GP5: Adopting and implementing written policies and procedures designed to address and protect all non-public information received related to their ESG ratings and data products. GP6: Improving information gathering processes with entities covered by their products. GP7: Responding to and addressing issues flagged by entities covered by their ESG ratings and data products while maintaining the objectivity of these products. ....
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....t information they need in order to make an assessment, analyse all the information relevant to their decision-making processes, and provide quality assurance; · ensuring personnel involved in the deliberation of ESG ratings and data products are professional, competent, and of high integrity; and · offering ESG ratings and data products to clients in a machine-readable format. 6 OICU-IOSCO GP2: Adopting and implementing written policies and procedures designed to help ensure that their decisions are independent, free from political or economic interference, and appropriately address potential conflicts of interest. GP3: Identifying, avoiding, or appropriately managing, mitigating, and disclosing potential conflicts of interest. ESG ratings and data products providers should consider: · adopting written internal policies and procedures and mechanisms designed to (1) identify, and (2) eliminate, or manage, mitigate and disclose, as appropriate, any actual or potential conflicts of interest related to their ESG ratings or data products that may influence the opinions and analyses ESG ratings and data products providers make or the judgment and analyse....
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....methodologies underlying their ESG ratings and data products to enable the users of these products to understand how their outputs were determined. Information regarding methodologies that ESG ratings and data products providers should consider publishing include, but is not limited to the: · measurement objective of the ESG rating or data product; · criteria used to assess the entity or company; · key performance indicators used to assess the entity against each criterion · relative weighting of these criteria to that assessment; · scope of business activities and group entities included in the assessment; 7 OICU-IOSCO · principal sources of qualitative and quantitative information used in the assessment as well as information on how the absence of information was treated; · time horizon of the assessment; and · meaning of each assessment category (where applicable). GP5: Adopting and implementing written policies and procedures designed to address and protect all non-public information received related to their ESG ratings and data products. ESG ratings and data products providers should consider: · adopting and....
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....n OICU-IOSCO INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS MAY 2017 CONTENTS Page Foreword and Executive Summary 3 A Principles Relating to the Regulator 4 B Principles for Self-Regulation 5 C Principles for the Enforcement of Securities Regulation 6 D Principles for Cooperation in Regulation 7 E Principles for Issuers 8 F Principles for Auditors, Credit Rating Agencies, and other information providers 9 G Principles for Collective Investment Schemes 10 H Principles for Market Intermediaries 11 I Principles for Secondary and Other Markets 12 J Principles Relating to Clearing and Settlement 13 Foreword and Executive Summary This Document sets out 38 Principles of securities1 regulation, which are based upon three Objectives of securities regulation. These are: · protecting investors;2 · ensuring that markets are fair, efficient and transparent; · reducing systemic risk. The 38 Principles need to be practically implemented under the relevant legal framework to achieve the Objectives of regulation described above. The Principles are grouped into ten categories. 1 For convenience, in this Document, t....
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....ion with domestic and foreign counterparts. 14 Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts. 15 The regulatory system should allow for assistance to be provided to foreign Regulators who need to make inquiries in the discharge of their functions and exercise of their powers. 7 E. Principles for Issuers 16 There should be full, accurate and timely disclosure of financial results, risk and other information which is material to investors' decisions. 17 Holders of securities in a company should be treated in a fair and equitable manner. 18 Accounting standards used by issuers to prepare financial statements should be of a high and internationally acceptable quality. 8 F. Principles for Auditors, Credit Rating Agencies, and other information service providers 19 Auditors should be subject to adequate levels of oversight. 20 Auditors should be independent of the issuing entity that they audit. 21 Audit standards should be of a high and internationally acceptable quality. 22 Credit rating agencies should be subj....