The European Union (EU) has been proactive in its efforts to regulate the financial sector’s integration of sustainability principles, encompassing Environmental, Social, and Governance (ESG) factors. Alongside measures targeting asset managers and corporates for sustainability reporting and disclosures, the EU is extending its regulatory oversight to include ESG rating and data providers.
This proposed regulation is driven by the objective of enhancing transparency and comparability within ESG ratings while promoting competition among rating providers. By mandating authorization from the European Securities and Markets Authority (ESMA), the EU aims to establish robust standards for methodologies employed in ESG scoring and to ensure the independence and ethical conduct of rating providers.
Such initiatives are part of the EU’s broader agenda to embed sustainability considerations into financial decision-making processes and combat instances of greenwashing, where companies exaggerate their environmental or social commitments. By regulating ESG rating providers, the EU seeks to bolster the credibility and integrity of ESG information accessible to investors and stakeholders across the European market.
More details here: https://www.consilium.europa.eu/en/press/press-releases/2023/12/20/sustainable-finance-council-agrees-negotiating-mandate-on-esg-ratings/
