Agencies could face fines of up to 10% of turnover under proposals to regulate funds’ ethical scores
Agencies that rate businesses and investment funds on their environmental, social and governance credentials may face fines for conflicts of interest under new EU rules aiming to regulate the fast-growing industry for the first time. The proposal, to be announced by the European Commission next week as part of a crackdown on “greenwashing”, will require ESG rating agencies — including those from outside the bloc — to certify with the EU’s financial regulator.
The agencies will be required to divest from any conflicting activities, such as consulting or offering insurance to businesses they rate, and risk being fined if conflicts of interest persist — a rule that observers said would force some agencies to change their practices.
The fines would amount to up to 10 per cent of annual turnover. European regulators are seeking to counter greenwashing in the rapidly growing sustainable finance industry and direct private financial flows towards genuinely environmentally friendly activities....
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