EU reaches agreement on new regulations for ESG ratings providers

Check out our article on the agreement of new EU rules for ESG Ratings providers, featured on GRIP, Global Relay’s new digital information service on practical compliance and regulatory change.

The new rules come as part of the EU’s continuing goal to improve the credibility and transparency of ESG ratings. Changes include:

• An extension to the transparency and integrity rules meaning firms who disclose ESG ratings as part of their SDFR marketing communications will now need to include information about the methodologies they use to reach those ratings, on their websites.

• Increased authorization and transparency requirements meaning EU ratings providers must be authorized and supervised by ESMA.

• Separation of E, S, and G ratings meaning ESG ratings providers will need to explain the composition of their ratings, for example whether E, S, and G are considered separately or in aggregation.

• A new requirement for firms to explain whether they use the “financial materiality” or “double materiality” approach to ESG assessment, with the ultimate goal of encouraging more firms to adopt the more stringent double materiality approach.

• A requirement for ESG ratings providers to demonstrate how they separate activities to avoid conflicts of interest.

For more information on this and other ESG matters, please get in touch.