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ESMA’s answer to the EU Commission’s Call for Evidence on ESG Ratings

At the end of June 2022 the European Securities and Markets Authority (ESMA) published its findings on their Call for Evidence on the nature, structure and scale of the market for ESG Rating and Data Providers in the EU.

ESMA determined, based on the answers they received, that there are currently 59 ESG rating providers active in the EU. This number was also compared to an International Organization of Securities Commission (IOSCO) Report on ESG Ratings and Data Products Providers.

ESMA also identified key characteristics and trends:

  • the market is split between a small number of very large non-EU entities and many significantly smaller EU entities
  • the legal entities of ESG rating providers were spread across EU Member States, but a many were clustered in three Member States (Germany, Italy and France)
  • the majority of users of ESG ratings are contracting several providers simultaneously to increase coverage, either by asset class or geographically or in order to receive different types of ESG assessments
  • complexity and lack of transparency around methodologies were also cited as an issue and
  • lack of coverage of specific industries or types of entities, insufficient granularity of data.

ESMA concluded, based on the feedback they received, that the market structure for ESG Ratings and Data Providers bears resemblance to the current credit ratings market. However, the specific market is still growing and in an immature state, which will probably lead to further development and change. Furthermore, ESMA will continue its investigation into this topic and support the European Commission in their efforts to introduce regulatory safeguards for ESG ratings.

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RBI Regulatory Advisory

Raiffeisen Bank International AG | Member of RBI Group | Am Stadtpark 9, 1030 Vienna, Austria  | Tel: +43 1 71707 - 5923