Brussels – Stricter Regulations for Sustainability Ratings in the EU
In a move to enhance investor confidence in sustainable financial products, EU countries have approved new regulations governing sustainability ratings for companies and investment products. These measures, adopted in Brussels, aim to make ESG ratings—short for Environmental, Social, and Governance—more reliable and comparable.
To accomplish this, the regulations will focus on improving the transparency and integrity of ESG rating providers while addressing potential conflicts of interest. Under the new rules, ESG rating agencies operating within the EU will be required to obtain approval from the European Securities and Markets Authority (ESMA) and adhere to stringent transparency standards, particularly concerning their methodologies and sources of information.
“ESG ratings play a crucial role in the proper functioning of capital markets and in reinforcing investor trust in sustainable investment options,” stated officials.
These new regulations stem from a proposal by the EU Commission that was discussed and refined by representatives from member states and the European Parliament last year. The finalized rules are set to be published in the EU Official Journal and will take effect 20 days later.
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