SEBI Market Update: ESG Rating Framework Review The Securities and Exchange Board of India (SEBI) has officially constituted a dedicated working group to conduct a comprehensive review of the regulatory framework for **ESG Rating Providers (ERPs)**. This move, announced on **February 18, 2026**, follows extensive feedback from market participants and aims to align India’s sustainability standards with evolving global practices. The sustainable finance market in India has seen exponential growth, reaching a valuation of approximately **$653.76 billion** in 2025. Projections indicate this sector could expand to **$2.42 trillion** by 2034, maintaining a compound annual growth rate (CAGR) of **14.44%**. This rapid scaling necessitates a more robust oversight mechanism for the agencies responsible for scoring corporate environmental, social, and governance performance. Structural Composition and Mandate The newly formed working group includes a diverse range of stakeholders: * Domestic and global ESG Rating Providers * Institutional investors and ESG analysts * Legal experts, academics, and corporate issuers The group’s primary mandate is to enhance transparency and reliability in ratings. It will examine current methodologies to mitigate "greenwashing" and address significant discrepancies in scores. Recent market data shows instances where a single company received a local ESG rating of **65** while maintaining global scores as high as **78**, highlighting the urgent need for standardized benchmarks. Strategic Alignment with Global Trends SEBI’s initiative coincides with major international shifts. In the European Union, new ESG Rating Regulations are set for application by **July 2026**, pushing for tighter supervision of providers. SEBI intends to evaluate these international developments to ensure the Indian framework remains competitive for foreign capital while respecting the unique context of the domestic market. Current mandates in India already require the top **1,000** listed entities to undertake reasonable assurance of their Business Responsibility and Sustainability Reporting (BRSR) Core. The working group will explore how ERPs can better utilize this assured data to provide more "Core ESG Ratings," which are seen as more reliable by the investor community. Market Impact and Outlook The global ESG investing market is projected to reach **$45.61 trillion** in 2026. As institutional investors now account for nearly **47.28%** of this segment, the demand for precise data is at an all-time high. In India, ESG integration remains the largest revenue-generating segment within sustainable finance, while Green Bonds are emerging as the fastest-growing instrument. The working group is expected to submit a report detailing recommended policy changes and regulatory tweaks. These recommendations will likely focus on internal governance at rating agencies, disclosure of scoring methodologies, and the management of potential conflicts of interest. This regulatory evolution is viewed as a critical step in maintaining investor confidence as India’s ESG-linked assets continue their double-digit growth trajectory through 2030.