ESG Ratings and Data Providers
ESG ratings play an essential role in the sustainable finance ecosystem by providing assessments of companies‘ ESG performance that are widely used to inform investment decisions. Consequently, there is a heavy reliance on ESG ratings among financial market participants without the internal capacity to gather and process large volumes of data on a wide range of ESG metrics.
To improve the transparency and comparability of ESG ratings, a Regulation on ESG ratings providers was proposed by the European Commission in June 2023 and finalised by EU institutions in February 2024. This Regulation establishes transparency requirements for ESG ratings, including the disaggregation of E, S and G metrics and further information as to their respective weighting.
As interest in sustainable investing has increased, so too has the importance of ESG data and ratings that measure the performance of assets and underlying companies. ESG ratings and data providers play an essential role in the sustainable finance ecosystem by providing information on and assessments of companies, that are material to investment decisions.
ESG ratings will also have to disclose whether they incorporate key EU notions in their assessment, such as Taxonomy alignment metrics. Additionally, the Regulation introduces rules to prevent conflicts of interest for ESG ratings providers, preventing them from also providing activities such as consulting, auditing and credit rating, while establishing clear separation of rules for banking, investment, insurance or benchmarking services.
These new rules on ESG ratings providers are expected to apply in early 2026.