Proposal for a Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities

Summary:

Legislative initiative adopted by the European Commission on 13 June 2023, seeking to improve the reliability and transparency of Environmental, Social and Governance (ESG) ratings activities. This is a text with EEA relevance.

Further information:

Investing which takes Environmental, Social, and Governance (ESG) factors into account when making investment decisions - also referred to as sustainable investments - has increasingly become an important part of mainstream finance. An ESG investment ecosystem has developed as a result, including amongst others the supply of ESG ratings. These increasingly affect the operation of capital markets and investor confidence in sustainable products.

However, the existing ESG rating market is deemed flawed and not functioning properly, with investors and rated entities' needs not being met and confidence in ratings becoming undermined. This draft law seeks to improve transparency of ESG ratings characteristics and methodologies, and to ensure increased clarity on operations of ESG rating providers and the prevention of risks of conflict of interest at ESG rating providers’ level.

The proposed Regulation was adopted by the European Commission on 13 June 2023 as part of a legislative package focusing on the European Union's (EU) sustainable finance framework. It also delivers on the Commission's renewed sustainable finance strategy adopted in 2021.

Official

EUR-LEX: SWD(2023)204: Staff Working Document accompanying the Proposal - Impact Assessment Report https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2023:204:FIN

EUR-LEX: SWD(2023)207: Staff Working Document accompanying the Proposal - Executive Summary of the Impact Assessment Report https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2023:207:FIN

European Commission: Sustainable finance https://finance.ec.europa.eu/sustainable-finance_en

European Commission: Press Release, 13/06/2023: Sustainable Finance: Commission takes further steps to boost investment for a sustainable future https://ec.europa.eu/commission/presscorner/detail/en/ip_23_3192

European Commission: Questions and Answers on the Sustainable Finance package (13 June 2023) https://ec.europa.eu/commission/presscorner/detail/en/qanda_23_3194

European Commission: Remarks by Executive Vice-President Dombrovskis and Commissioner McGuinness at the press conference on the sustainable finance package (13 June 2023) https://ec.europa.eu/commission/presscorner/detail/en/speech_23_3258

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