Position paper on the ESG rating proposal

FESE welcomes the Commission’s proposal for a Regulation on the transparency and integrity of ESG rating activities. We believe that the proposal is balanced, represents a good starting point, and could contribute greatly to the sustainable transition and sustainability objectives in line with the European Green Deal and UN Sustainable Development Goals.

We believe that clear definitions are central to the workability of the regulation, and ultimately its effectiveness. Any new regulatory intervention in this field needs to strike a good balance between the overarching policy objectives of the EU and crucial market development, including innovation in the ESG rating industry. Moreover, FESE considers that the introduction of price regulation in the ESG rating market is insufficiently justified, and we would call for a better impact assessment. 

We appreciate the establishment of principles-based organisational requirements and recognise that transparency and disclosure requirements are key aspects. Methodological transparency can contribute significantly to the application of relevant metrics to achieve the objective of the investment product and thus maintain investor trust.

FESE supports a level playing field between EU and third-country providers regarding regulatory requirements. For example, the proposed third-country regime for recognition is deemed overly restrictive in some respects. It is also important that the regulation is proportionate and does not result in a too burdensome and costly regime impacting innovation and coverage of smaller issuers.