SEBI Regulations for ESG Rating Providers defines “environmental, social, and governance ratings”, or “ESG ratings” means the rating products that are marketed as opinions about an issuer or a security, regarding its ESG profile or characteristics or exposure to ESG risk, governance risk, social risk, climatic or environmental risks, or impact on society, climate and the environment, that are issued using a defined ranking system of rating categories, whether or not these are explicitly labelled as “ESG ratings”

ESG ratings is issued by SES ESG on companies listed on stock exchanges viz. BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) or any other recognized stock exchanges.

Once an ESG rating has been assigned, it is updated annually upon publication of BRSR / Annual Report. However, as and when there are material developments related to environmental, social and governance factors of a particular company, the ratings are being updated based such material developments / disclosure events.

SES ESG follows “Subscriber-pays” business model, where SES ESG derives its revenues for ESG ratings from subscribers that may include banks, insurance companies, pension funds, or the rated entity itself (for any package). In order to avoid conflict of interests, SES ESG does not charge from the company for issuing of ESG ratings for that company.

The ESG ratings provided by SES ESG do not constitute recommendations to buy, hold or sell any securities. Independent analysts like SES do not know the internal happenings of a company, nor do we have an inside view of the company’s practices. It may be possible that while on paper based on available information everything might appear to be in order but in reality, there could be concerns plaguing the company. It is beyond scope of our work, nor we possess such expertise to verify the public documents and / or visit the company to check its internal controls, checks and practices. Therefore, we would advise stakeholders to note that our scores are worked out only on the basis of published information and no forensic work has been done. Users may take a note of same and read our scores accordingly. Readers are requested to arrive at any judgement only after considering SES ESG score together with other research reports on issues other than ESG. This will give a holistic view.

SES uses standardized industry classification published by Stock Exchanges. Further, SES uses SASB Industry Classification (part of IFRS Foundation) as well for identifying the material issues in a particular industry. However, SES has mapped the SASB Industry Classification with Standardized Industry Classification published by Stock Exchanges.

SES uses only public data using following sources of information: Business Responsibility & Sustainability Reports (BRSR), Annual Reports, Sustainability / Integrated / ESG Reports, information disclosed to stock exchanges, information available on website of the Companies, any regulator especially sectoral regulator, Watchout investors, and any other authentic publicly available information relating to the Companies. The Ratings are worked out only on the basis of published information available in public domain and no forensic work has been done. As a result, any information which has not been disclosed in the public domain has not been taken into consideration. As SES believes that disclosure must be adequate and in public domain, therefore as a matter of principle and to maintain absolute independence and fairness to all company’s SES extracts information available in public domain only and no interaction is done with the companies.

The ESG Model has been designed to evaluate objectively Company’s disclosure and performance on ESG front. Any evaluation which aims to bring differentiation and separate aspiration to do better from run of the mill compliances alone, must necessarily have benchmarks beyond legal compliance parameters. As a result, evaluation parameters in SES Model under Policy Disclosures and three main factors viz. Environment, Social and Governance are not only based on mandatory legal requirements to be followed by listed Indian Companies, but also incorporate best practices followed around the World and few SES created benchmarks. For example, disclosures under Environment & Social parameters are evaluated not only based on Business Responsibility & Sustainability Reports, but also on key disclosure requirement of Sustainability Reports and/or Integrated Reports (GRI/ IIRC), TCFD, etc. Similarly, for Governance factor, parameters are set as required under the Companies Act, 2013, SEBI (LODR) Regulations, 2015 and other applicable laws as well as the best practices followed around the World (such as ICGN governance principles) along with SES’ own Benchmarks.

National Voluntary Guidelines, Business Responsibility & Sustainability Reports, Legal requirements relating to Environment & Social, Companies Act, 2013, various Regulations / legal requirements of SEBI and relevant other applicable legal requirements or voluntary frameworks. On global standards, it is primary based on SASB Standards (now part of IFRS Foundation) and also follows United Nations Principles for Responsible Investing; Global Reporting Initiative – GRI Standards; Sustainable Development Goals; Task Force on Climate-Related Financial Disclosures; UNGC Principles, International Organization for Standardization and relevant frameworks.

SES Evaluation Framework Model rates based on policy disclosures, targets set, adequacy of disclosure, initiatives taken and performance for three factors viz. E S & G, through well researched questions (800+ direct or indirect questions), these questions are aimed to get binary answers based on disclosures made by a company. These binary answers are used to give section wise numerical score and then finally giving the company a grading. In order for model to work and reflect true picture, absolute precondition is that the relevant information or data on key ESG factors is disclosed properly. SES ESG Rating does not only look into disclosures practices of the Company but also takes into account factual position and future targets (based on disclosures) of the Company on ESG factors. The Model also evaluates the performance of the Company for given policy or target over a period of time. For instance: under Health & Safety Policy, not only existence of policy is examined but also whether the Company follows Health & Safety Policy, any standards applied for Health & Safety, number of fatalities / injuries Y-o-Y, steps taken to reduce such fatalities / injuries etc, improvements / deterioration is also assessed. Overall, ESG Rating is an outcome of the analysis of the Company’s disclosure practices, policies, present/ actual position and future prospects of the Company. Further, the Model also provides positive scores based on implementation of sustainable practices and meeting the parameters of performance evaluation.

Conscious of the fact that one size does not fit all, SES has taken care to ensure that proper rationale and logic is applied while assigning weightage between three factors E, S & G in an objective manner. The weightage of Environment, Social and Governance factors in Model vary based on industry classification. While arriving at the weightage of each of the heads and sub-heads within three factors, SES has taken into account the weightage of each of the sub-heads considered in the ‘Standards set by the Sustainable Accounting Standards Board’ and ‘SASB Materiality Map’ (SASB - now part of IFRS Foundation) are considered. Based on SASB Standards and SASB Materiality Map, SES has determined the weightages, which varies from the industry to industry based on materiality of issues to the relevant industry. It may be noted that “SES licenses and uses the SASB Materiality Map® Disclosure Topics and SICS in ESG Work”

SES as a policy adjusts scores (negative adjustment up to 25% based on severity) of a factor whenever there is an extra-ordinary issue / concern, which is highly subjective, and cannot be covered under model evaluation. For instance, cases such as material irregularities / regulatory actions / product recall / plant shutdown due to Environmental or Social issues etc.

Material Development is regularly monitored by SES ESG. It may be noted that based on further update from the Company, the Rating may change based on nature of update on the matter & its impact. However, there still would be some negative impact of regulatory action even though all issues are resolved, as ratings are not only based on present position but alos on conduct in past. A regulatory action is a commentary on conduct even though resolved ( unless it is proved that regulatory action was wrong ab-initio)

o Analysing the Industry in which Company operates. o Raw Data Collection o Review of such Raw Data Collected o Scoring each of the questions in Evaluation Framework Model based on data collected o Review of data inputted in Evaluation Framework Model and finalising the ESG Ratings. o Preparation of the Report. o No subjectivity or discretion is involved in rating process

Upon availing the subscription services with SES ESG, you will receive login credentials which will provide you access to online web-based portal. However, ESG Rating/ score of all SES ESG rated companies will be available on SES ESG website.

SES ESG does not provide consulting or advisory services relating to or any areas related to environmental, social and governance aspects including ESG ratings.

You can write to us at infoesg@sesgovernance.com Alternatively, you can also contact on +91 22 4022 0322