ESG and sustainability are becoming increasingly central to investment decisions around the world. COP26 in particular provided a big boost to sustainable finance and the shift in capital toward sustainable activities.
ESG ratings are a vital component of this
capital re-allocation so both demand for and reliance on these products
is only expected to grow. It is therefore crucial that market users and
investors have confidence in ESG ratings when making investment
decisions.
However, with the ESG Ratings market still in its
infancy and demand increasing at a rapid rate, it is unsurprising that
significant challenges are emerging. These include transparency of
methodology, ratings varying widely between different providers, clarity
of purpose behind different products, availability of data disclosure,
and potential conduct risks. As demand is set only to accelerate, it is
paramount that these challenges are addressed to ensure the market is
fit for purpose and can properly support market practitioners in
assessing the risks and opportunities of potential ESG investments.
It
is in response to this need that the IRSG, in partnership with
Accenture, has undertaken this work. This report explores the challenges
the market faces in its present state and offers recommendations of
steps industry, regulators and policymakers can take to futureproof the
integrity and efficiency of the ESG Ratings Market.
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ESG Ratings and ESG Data in Financial Services – A view from practitioners">ESG Ratings and ESG Data in Financial Services – A view from practitioners
IRSG
© IRSG - International Regulatory Strategy Group
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