EBF COMMENT

EBF comments on the European Commission’s proposal for a Regulation on ESG ratings

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BRUSSELS, 6 September 2023 – The European Banking Federation (EBF) welcomes the opportunity to respond to the Have Your Say on the European Commission’s proposal for a Regulation on the transparency and integrity of Environmental, Social, and Governance (ESG) rating activities.

Given the pivotal role of ESG ratings in sustainable finance and the significant growth of this market, we believe that the substantial enhancement of transparency in areas such as models, assumptions, methodologies, and the introduction of supervision by ESMA would represent a significant improvement of the current ESG landscape.

In this paper, we provide the European banking industry’s advice, which aims at enhancing the regulatory framework for ESG ratings as well as ensuring greater cohesiveness and consistency within the broader sustainable finance framework.

Some key considerations are the following:

• transparency is key in ensuring the comparability and reliability of ESG ratings on the market. We strongly welcome the proposed introduction of disclosures (on the websites of ESG rating providers) of methodologies, information about rated companies’ fees, data sources, data “timestamps”, as well as of their level of independence;
• to contribute to the creation of a qualitative standard for ESG ratings, we believe that the regulation of ESG ratings should be as rigorous as that of traditional credit rating activities;
• we recommend that ESG ratings providers operating in the EU be subject to the same requirements, regardless of whether they are based in the EU or not, as to ensure a level playing field among market participants;
• we strongly encourage the regulation of ESG data providers whenever ESG data is modified in any manner or sourced from third parties. With data as the foundation of the sustainable finance framework, regulating ESG data providers is fundamental to ensure the overall credibility and functioning of the market.

For a comprehensive overview, kindly refer to our position paper.

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About the EBF:

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.