Definition
ESG Rating
An ESG rating is an assessment by a rating provider of how well a company manages environmental, social and governance risks.
ESG rating providers analyse disclosures and other data to score companies on sustainability and governance, helping investors integrate non-financial risk into decisions. SEBI has introduced a regulatory framework for ESG Rating Providers (ERPs) in India to improve transparency and address concerns over inconsistent methodologies.
ESG ratings can vary widely between providers for the same company, reflecting different weightings and data. SEBI's framework and the BRSR are meant to make underlying data more standardised and assurable.
Related terms
- Credit RatingA credit rating is an independent agency's assessment of a borrower's ability to repay debt, ranging from AAA (safest) down to D (default).
- ESG (Environmental, Social, Governance)ESG refers to the environmental, social and governance factors used to assess a company's sustainability and ethical impact alongside financial performance.
- Business Responsibility and Sustainability Report (BRSR)The BRSR is a SEBI-mandated disclosure in which large listed companies report their ESG performance in a standardised format.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.