The agreement between the Council and the European Parliament concerns the Regulation on ESG rating activities, aiming to enhance investors’ confidence in sustainable products. This agreement is based on a proposal from the Commission dated June 13, 2023. ESG ratings assess the sustainability of a company or financial instrument in terms of exposure to environmental, social, and governance risks and impacts.
The new rules aim to make ESG ratings more reliable and comparable, increasing transparency and integrity, and preventing conflicts of interest. ESG rating providers must be authorized and supervised by ESMA, complying with transparency requirements regarding their methodology and information sources.
The main innovations of the agreement include:
- Disclosure of ESG ratings in financial marketing materials must be accompanied by the publication of methodologies used on the website.
- ESG ratings must include environmental, social, and governance factors and can be provided separately or combined, but the weighting of factors must be clear.
- EU ESG rating providers must obtain authorization from ESMA.
- Non-EU ESG rating providers operating in the EU must obtain approval from an EU ESG rating provider or be included in the EU register, based on equivalence criteria or dialogue between ESMA and the competent authority of the third country.
- A temporary and optional registration regime of three years is provided for small businesses providing ESG ratings, with exemption from ESMA supervisory fees but with transparency and governance requirements.
- The provisional agreement must be definitively approved by the Council and the EU Parliament and published in the Official Journal of the European Union, becoming effective 18 months after its entry into force.
Source: Diritto Bancario
