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(BRUSSELS) – The EU institutions reached provisional agreement Monday on a regulation on environmental, social and governance rating activities, which aims to boost investor confidence in sustainable products.
Belgium’s finance minister Vincent Van Peteghem, speaking for the EU presidency, welcomed the agreement: “Increasing investor confidence through transparent and regulated ESG ratings can have a significant impact on our transition to a more socially responsible and sustainable future.”
ESG ratings provide an opinion on a company’s or a financial instrument’s sustainability profile, by assessing its exposure to sustainability risks and its impact on society and the environment.
ESG ratings are seen as having an increasingly important impact on the operation of capital markets and on investor trust in sustainable products.
The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations of ESG ratings providers and preventing potential conflicts of interests.
Under the new rules, ESG rating providers will need to be authorised and supervised by the European Securities and Markets Authority (ESMA) and comply with transparency requirements, in particular with regard to their methodology and sources of information.
