Module: | SEBI LODR & Corporate Governance Frameworks
Q19: Consider the following statements regarding the regulatory framework for Environmental, Social, and Governance (ESG) Rating Providers (ERPs) formulated by SEBI for 2025:
1. A Core ESG Rating issued by an ERP must be strictly based on third-party assured data, such as the reasonably assured BRSR Core.
2. An entity holding 10 percent or more shares in a registered ERP is permitted to hold up to 25 percent of the shares in another SEBI-registered ERP.
3. ERPs are explicitly prohibited from providing internationally aligned ESG ratings and must exclusively use models tailored to the Indian market.
Which of the above statements is/are incorrect?
2. An entity holding 10 percent or more shares in a registered ERP is permitted to hold up to 25 percent of the shares in another SEBI-registered ERP.
3. ERPs are explicitly prohibited from providing internationally aligned ESG ratings and must exclusively use models tailored to the Indian market.
Which of the above statements is/are incorrect?
✅ Correct Answer: B
🎯 Quick Answer:
B. Only 2 and 3 are incorrect.Structural Breakdown: Statement 1 is correct.
Statement 2 is incorrect; an entity holding 10% or more in one ERP cannot hold 10% or more in any other SEBI ERP.
Statement 3 is incorrect; ERPs can offer international ratings.
Historical/Related Context: SEBI brought ERPs under the Credit Rating Agencies framework to combat greenwashing.
Causal Reasoning: Restricting cross-holding ensures market competition and prevents monopolistic practices.