While ESG providers remain largely unregulated, their influence is expected to grow considerably.
There are a series of underlying
challenges, including discrepancies in ESG measurements and ongoing data
quality problems. In particular:
-
- Most users have difficulty understanding the underlying methodology
for a specific ESG rating as ESG rating providers consider the
methodologies proprietary information
- There is little coherence between methodologies amongst ESG rating
providers, resulting in significantly diverging outcomes: the same
company may be considered high risk, medium risk or low risk if rated by
three different agencies
- ESG ratings do not always consider the impact and focus of an
organization on the environment (double materiality) – hence there
continues to be a gap between some investors’ expectations (e.g., of
retail investors) and real impact
- A clear framework with consistent global principles and harmonized
standards for ESG rating (EFRAG, IOSCO and International Sustainability
Standards Board), which is currently lacking, would make it possible to
have a clear and objective evaluation of financial market participants
from an ESG perspective
You can read the EBF’s integral response to ESMA’s Call For Feedback
on Market Characteristics for ESG Rating Providers in the EU below.
EBF
© EBF
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article