On June 13, 2023 the European Commission published a proposal for a regulation on the transparency and integrity of ESG rating agencies.
ESG ratings play an important role in the EU sustainable finance market, providing investors and financial institutions with key information, such as investment strategies and risk management in relation to ESG factors. The ESG ratings market currently suffers from a lack of transparency, and the Commission is therefore proposing regulations to increase this transparency in order to help investors make more informed decisions. New organizational principles and clear rules to prevent conflicts of interest will also strengthen the integrity of ESG rating providers' activities. While the objectives of this regulation are justified, the impacts it could have are difficult to quantify, including budgetary implications, a possible separation of company activities and a reduction in the number of suppliers. Doubts also remain as to the dependence of companies on a single supplier and the complexity of calculation methods, which could make the objective of transparency and understanding difficult to achieve.
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