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EU Reaches Provisional Agreement on ESG Ratings Regulation

Posted on February 27, 2024
Posted in Environmental, Social, and Governance

The European Parliament and the Council of the EU have made some significant changes to the European Commission’s proposal.

On 5 February 2024, the European Parliament and Council of the EU announced that they had reached a provisional political agreement on the text of the ESG Ratings Regulation (the Regulation). The agreed text was subsequently published on 14 February 2024. The Regulation was initially proposed by the Commission in June 2023, and seeks to introduce a new regulatory regime for ESG ratings providers “operating in the Union”. Refer to this Latham blog post for previous commentary on the proposal.

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EU Consults on Plans for a New Regulatory Regime for ESG Ratings Providers

Posted on June 16, 2023
Posted in Environmental, Social, and Governance

An evolving landscape of reforms in the ESG ratings sector continues to pose challenges to providers of ratings and scores.

By Paul A. Davies, Nicola Higgs, Rob Moulton, Michael D. Green, Becky Critchley, Anne Mainwaring, and Charlotte Collins

International momentum to regulate ESG ratings continues as the European Commission released a consultation on 13 June 2023 to create a new regulatory regime for ESG ratings providers. This consultation follows a Call for Evidence that the European Securities and Markets Authority (ESMA) issued on 4 April 2022.

UK Government Consults on Regulation of ESG Ratings Providers

Posted on March 31, 2023
Posted in Environmental, Social, and Governance, Green Finance

The consultation considers what a potential regulatory regime would look like, and its proposed scope.

By Nicola Higgs, Paul A. Davies, Becky Critchley, Anne Mainwaring, Ella McGinn, and Charlotte Collins

On 30 March 2023, HM Treasury published a consultation on regulating ESG ratings providers, which ties in with and was published alongside the UK government’s latest Green Finance Strategy paper.

The government announced as part of the Edinburgh Reforms last year that HM Treasury would consult on a potential regulatory regime for ESG ratings providers. Now HM Treasury is seeking views on whether such a regime should be introduced, and what its potential scope should be. The government is not proposing to regulate ESG data providers for the time being. The consultation is open until 30 June 2023; no further timetable has been set at this stage but it could take a couple of years for any new regime to be finalised and take effect.

FCA Identifies “Clear Rationale” for Regulating ESG Data and Ratings Providers

Posted on July 7, 2022
Posted in Environmental, Social, and Governance

The FCA emphasised the increasing prevalence of providers and the potential harm from lack of regulation in this area.

By Paul A. Davies, Nicola Higgs, Michael D. Green, and James Bee, and Anne Mainwaring

In June 2022, the UK’s Financial Conduct Authority (FCA) issued a Feedback Statement in response to a consultation paper on ESG integration in capital markets that it had initially issued in June 2021. The consultation sought views from stakeholders on certain issues in relation to both ESG-related debt instruments (e.g., green and social bonds) and the role of ESG data and ratings providers, topics the FCA identified as “active areas of industry debate”.

EU Issues Call for Evidence on the ESG Ratings Market

Posted on April 12, 2022
Posted in Environmental, Social, and Governance

The Call for Evidence is one of a number of measures the EU is taking as it aims to strengthen the reliability of ESG ratings.

By Paul A. Davies, Sarah E. Fortt, Betty M. Huber, Michael D. Green, and James Bee

On 4 April 2022, the European Commission (Commission) published a call for evidence (Call for Evidence) to solicit responses to inform the Commission on the dynamics of the ESG ratings market in Europe, including on the use and objectives of ESG ratings and the interplay between larger and smaller market players.

Given the growing interest in ESG issues from investors in recent years, ESG ratings and similar products have become increasingly popular as an independent and easy-to-use data point for investors to compare companies’ ESG credentials. However, this popularity has led to concern from some market participants and regulators as to the currently unregulated nature of the ESG rating provider market. This unregulated nature has in turn led to concerns regarding the consistency and quality of ESG ratings, as well as the ability to compare ESG ratings from different providers who often use materially different methodologies.

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