Environmental, social and governance ratings

Key points

The EESC:

• fully supports the proposal of the Commission to regulate for the first time environmental, social and governance (ESG) ratings in order to facilitate their contribution to the transition to a climate-neutral economy, a legislative proposal it has called for previously;
• recommends further clarifying the definitions of "ESG rating" and "ESG rating providers" by adding the element of regular commercial basis, in order to avoid civil society organisations (CSOs) producing scoreboards as a non-major and non-profit activity, as well as academic research and journalistic work, unintentionally falling under the scope of the Regulation;
• welcomes the transparency provisions proposed by the Commission and recommends increasing the share of information to be provided to the general public rather than exclusively to the rated entities and ratings users, and suggests that similar provisions be applied to ESG data providers;
• welcomes the proposed introduction of an authorisation process and organisational requirements;
• believes that minimum requirements on the quality of the ratings should be included in order to prevent greenwashing, "social-washing" and other types of misinformation;
• believes that mandatory inclusion of double materiality should be part of these minimum quality requirements for ESG ratings;
• believes that the present Regulation should assist in leading ESG rating market to maturity by fostering reliable information and raising standards through regulated competition between ratings providers;
• calls on the legislator to adopt solutions that encourage financial market players to factor in just transition requirements, making the complementarity of environmental and social objectives explicit;
• recommends further strengthening the rules on conflicts of interest by separating activities at group level and by empowering the European Securities and Markets Authority (ESMA) to effectively put an end to conflicts of interest;
• suggests only allowing access to third country ESG rating providers in the EU single market through equivalence decisions and endorsement of an EU-based ESG rating provider, in order to prevent regulatory arbitrage;
• calls on the co-legislators to ensure a level EU playing-field so that small and medium-sized enterprises (SMEs), social economy enterprises, and providers of services of general interest (SGIs) get fair treatment in ESG ratings;
• reiterates the need to start a political process in view to establishing a public EU sustainability agency that could provide ESG ratings for the benefit of the single market.