In the course of this consultation, the European Commission (EC) were particularly seeking stakeholders’ feedback on proposals for a Regulation focused on enhancing the quality of information about ESG ratings, by (i) improving transparency of ESG ratings characteristics and methodologies, and by (ii) ensuring increased clarity on operations of ESG rating providers and the prevention of risks of conflict of interest at ESG rating providers’ level. Since ESG ratings and underlying data are used for investment decisions and allocation of capital, the general objective of the initiative is to improve the quality, reliability and comparability of ESG ratings to enable investors to make better informed investment decisions in regard to sustainability objectives.

ALFI supports the overarching objective of enhancing the transparency, reliability and comparability of ESG rating and ESG data products, to foster trust and confidence in the operations of ESG rating providers for the investment management industry and for the end-investors. In its response, ALFI outlines that it is of utmost importance to include in Regulation not only ESG rating providers, but also providers of ESG data products, in compliance with the IOSCO recommendations. Meanwhile, ALFI highlighted the concern that proper exemptions to this Regulation should be specified, encompassing the ESG rating and measurements performed by the Financial Market Participants for internal or group-wide use, as well as the ESG rating and data disclosures they need to perform in compliance with the existing SFDR and MIFID II requirements.

View the ALFI response.