ESMA Seeks Feedback on Draft Standards to Regulate ESG Rating Providers in Europe

ESMA Seeks Feedback on Draft Standards to Regulate ESG Rating Providers in Europe

The European Securities and Markets Authority (ESMA) has launched a public consultation to establish new regulations for ESG rating providers. This initiative aims to enhance transparency and accountability within the environmental, social, and governance (ESG) rating industry.

Overview of Proposed Regulations for ESG Rating Providers

ESMA’s draft Regulatory Technical Standards (RTS) introduce a set of guidelines and requirements for ESG rating providers. These standards are crucial for ensuring that the ESG ratings delivered to stakeholders are reliable and trustworthy.

Key Requirements for ESG Rating Providers

The proposed RTS outlines several essential requirements, including:

  • Information Submission: Details on what information must be provided when applying for authorization or recognition.
  • Internal Safeguards: Expectations for internal controls to mitigate potential conflicts of interest, especially for providers offering services beyond ESG ratings.
  • Transparency Levels: Requirements for disclosures to various stakeholders, including the public, rated entities, issuers, and users of ESG ratings.

Stakeholder Engagement and Feedback Timeline

ESMA is actively seeking feedback from all relevant stakeholders, including financial institutions, companies using ESG scores, and those seeking registration as ESG rating providers. The consultation period will remain open until 20 June 2025.

Following this consultation phase, ESMA plans to finalize the standards and submit them to the European Commission for adoption in October 2025.

Importance of the Consultation

This consultation is particularly significant for:

  • Companies aiming to become recognized ESG rating providers.
  • Financial institutions that utilize ESG ratings in their decision-making processes.
  • Entities that are evaluated based on ESG scores.

The complete consultation paper is accessible here.

For additional information on ESG regulations and their implications, visit our ESG Regulations Overview page.

READ ALSO  11 Key Questions to Identify the Perfect ESG Reporting Solution for Your Business

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