Ind-Ra to disclose more ESG notes on ratings from January 2022

These disclosures will be part of rating action commentaries for all entities having listed securities, says the rating agency

India Ratings and Research on Thursday said its rating actions, starting with listed securities, will have detailed disclosures on environmental, social and governance (ESG) factors of the rated entity.

“These disclosures will be part of rating action commentaries for all entities having listed securities whose ratings will be assigned or reviewed effective 1 January, 2022,” the rating agency said.

“The E, S and G relevance can be both positive and negative and will be sector based and entity specific,” the rating company said. The disclosures are drawn from Sustainability Accounting Standards Board’s (SASB) Global Sustainability Framework with a total of 14 factors (five for Environmental, five for Social and four for Governance, details at the end of the release).

The disclosures will be based on factors relevant to the sector in different degrees. Such factors can be ‘minimally relevant,’ ‘relevant’ and ‘highly relevant’.

While the governance factor is immediately relevant at all times, the environmental and social factors are long term, and India Ratings expect companies to have ample time to mend those relevant for rating. “We are starting off with listed securities, which we will expand to listed entities and over a period of time to unlisted firms. This will provide the system to adjust to these disclosures and help develop a healthy ecosystem around ESG risks,” said Rakesh Valecha, senior director and head, core analytical group, India Ratings and Research.

“Ind-Ra over the past few months has actively engaged with investors and other market participants to understand what they want to see from a rating agency before devising the new relevance disclosures. Our focus is purely on a fundamental credit analysis and so our ESG Relevance Disclosures are solely aimed at addressing ESG in that context,” said India Ratings in a statement.

“The disclosures are not a moral judgment on ESG, they focus on the relevance of the elements of E, S and G which have an impact on the credit. We believe these enhanced disclosures will aid investors in their credit decisions and also  kick off a much needed focus on the issue with issuers ,” said Valecha.