What Is an ESG Rating Provider? SEBI Registration Rules
An ESG rating provider is a company registered with SEBI to issue environmental, social and governance ratings on issuers and securities that are listed or proposed to be listed in India. The business was unregulated until SEBI amended the Credit Rating Agencies Regulations with effect from 4 July 2023 and put ESG rating providers inside them. This guide explains what an ESG rating provider is, the two registration categories, and how the regime differs from credit rating.
Definition
An ESG rating provider
is a company registered with SEBI to issue environmental, social and governance ratings of issuers or securities listed or proposed to be listed on a recognised stock exchange. It is regulated under the SEBI (Credit Rating Agencies) Regulations, 1999, which set separate eligibility, net worth and staffing bars for Category I and Category II providers. Source: SEBI.
What must an ESG rating provider be, before it rates anything?
The eligibility gate is structural rather than reputational. The applicant must be incorporated as a company under the Companies Act, 2013, with ESG rating activity as the main object in its memorandum of association, and it must not already be a credit rating agency or any other SEBI registered intermediary.
It must file a business plan carrying a target breakeven date, target revenue and client count within two years of registration, and the cumulative cash losses it projects until breakeven. SEBI requires those targets to be set by the applicant itself, limited to securities market operations, and reasonable. Registration is in one of two categories.
Category I versus Category II
Rs 5 crore against Rs 10 lakh
The minimum liquid net worth an ESG rating provider must maintain at all times, Category I against Category II. At application the bar is higher: Rs 10 crore or Rs 20 lakh respectively, or the base amount plus projected cumulative cash losses to breakeven, whichever is greater
Source: SEBI (Credit Rating Agencies) Regulations, 1999, Regulations 28E
| Category I | Category II | |
|---|---|---|
| Minimum liquid net worth, continuous | Rs 5 crore | Rs 10 lakh |
| At application | Higher of Rs 10 crore, or Rs 5 crore plus cumulative cash losses to breakeven | Higher of Rs 20 lakh, or Rs 10 lakh plus cumulative cash losses to breakeven |
| Specialist employees | At least four | At least two |
| Office space | Required | Not mandatory if operating remotely, on a declaration |
| Green debt securities certification | Permitted | Not permitted |
| Promoter shareholding | 26% minimum for five years from registration | Not specified in the same terms |
The specialist employees must cover governance, sustainability, and social impact or social responsibility, among the areas SEBI lists.
Note the unit change across that first row. Category I is stated in crore and Category II in lakh, a fifty times difference in the continuous requirement, and the two categories are not two tiers of the same business so much as two different businesses. The liquid net worth may be drawn down in line with the business plan submitted at application, subject to continued compliance.
Who can promote a Category I provider?
Among the routes SEBI allows is a body corporate with a continuous net worth of at least Rs 100 crore across its audited accounts for the previous five years, or a foreign ESG rating provider incorporated in a Financial Action Task Force member jurisdiction with at least five years of experience rating ESG of securities or companies.
How this differs from a credit rating agency
The two regimes now sit in one rulebook, which makes it easy to conflate them.
A credit rating is an opinion on whether debt will be serviced on time, and a credit rating agency must at all times maintain a minimum net worth of Rs 25 crore. An ESG rating is an opinion on environmental, social and governance factors, and its provider must maintain liquid net worth measured in crore or lakh depending on category. The registrations are mutually exclusive by design.
There is also a revenue model distinction inside the ESG definitions themselves, added by the SEBI (Credit Rating Agencies) (Second Amendment) Regulations, 2025 with effect from 23 April 2025, which addresses providers deriving revenue from subscribers including banks, insurers, pension funds, or the rated entity itself.
Where an ESG rating meets the filing record
An ESG rating is an opinion about a company. The disclosures underneath it are filings you can read directly: the BRSR for sustainability data, the corporate governance report for board and committee composition, and the related party transaction disclosures for dealings with connected parties. Flock reports the filings themselves, dated and linked to source. Not investment advice.
Frequently asked questions
What is an ESG rating provider?
A person registered with SEBI to issue environmental, social and governance ratings of issuers or securities that are listed or proposed to be listed on a recognised stock exchange. ESG rating providers are regulated under the SEBI (Credit Rating Agencies) Regulations, 1999 as amended with effect from 4 July 2023. Source: SEBI.
What is the difference between a Category I and Category II ESG rating provider?
Scale and scope. A Category I provider must maintain minimum liquid net worth of Rs 5 crore and at least four specialist employees. A Category II provider must maintain Rs 10 lakh and at least two, may operate without office space if it works remotely, and may not certify green debt securities. Source: SEBI (Credit Rating Agencies) Regulations, 1999.
Can a credit rating agency also be an ESG rating provider?
Not under the same registration. Regulation 28E requires that the applicant is not a credit rating agency or any other intermediary registered with the Board, so the ESG rating business is registered as a separate company with ESG rating as its main object. Source: SEBI (Credit Rating Agencies) Regulations, 1999, Regulation 28E.
Is an ESG rating the same as a credit rating?
No. A credit rating is an opinion on the likelihood of timely debt servicing, issued by a credit rating agency that must maintain a minimum net worth of Rs 25 crore. An ESG rating is an opinion on environmental, social and governance factors, issued under a separate registration. They answer different questions. Source: SEBI.
Flock tracks these filings, sourced, dated, and linked back to the original. See what smart-money entities disclosed, without the guesswork about what it means.
Disclosures shown are public regulatory filings. Data may be delayed or incomplete. Smart-money entities may no longer hold positions shown. Not investment advice.