For ESG ratings providers in the EU, those who use that information, and companies rated:
To get a sense of possible regulations on the horizon, see ESMA’s recent statement on the outcome of its Call for Evidence issued in February. Among its findings from the industry’s input, ESMA highlights insufficient data, particularly about SMEs and non-listed companies, as fundamentally impacting the usability and relevance of ESG ratings. Also cited:
· low transparency of rating methodologies and data sources
· lack of comparable and standardized data
· a misalignment on the definition of “ESG”
· delays in updating or correcting underlying ESG data
· ratings methodologies biased toward larger, listed and U.S.-based companies
· conflict of interest risks
ESMA notes that the input it received may prove “useful for a possible assessment around the need for introducing regulatory safeguards for ESG rating products”