Eurosif letter to ESMA on ESG Ratings and their role in the market for sustainable investment products

On 21 March 2022, Eurosif sent a letter to Ms Natasha Cazenave, Executive Director of the European Securities & Market Authority (ESMA). The subject was the ESG Ratings and their role in the market for sustainable investment products.

ESG ratings play an increasingly important role in European capital markets, as a growing number of investment products and strategies may integrate these ratings in their investment process. This very pluarlity of views is beneficial for investors and enables them to form a more sophisticated view of a particular company, using different ratings to assess different aspects of the Environmental, Social & Governance (ESG) specturm. We find the analogy made with credit ratings and their high degree of correlation to be inappropriate.

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Eurosif believes it is essential for any further regulatory intervention in the area of ESG ratings, data and services to appreciate the diversity of data solutions offered, the purpose they each serve and whether it is desirable or feasible to seek further harmonisation of methodologies. The conclusions may be different per type of data service. This nuance will be vital to crafting appropriate policy responses to the dynamic and multifaceted market in ESG data services in the EU.