Regulation of ESG Rating Practices in the EU

This EU regulation aims to achieve the following overarching goals for ESG ratings: 1. Enhance the integrity, transparency, comparability (where possible), responsibility, reliability, good governance, and independence of ESG rating activities. This, in turn, contributes to the transparency and quality of ESG ratings and the sustainable finance agenda of the Union. 2. Contribute to the smooth functioning of the internal market while achieving a high level of consumer and investor protection. 3. Prevent greenwashing and other types of misinformation, including social washing, by introducing transparency requirements related to ESG ratings and rules on the organization and conduct of ESG rating providers. To achieve these objectives, the regulation sets a common regulatory approach to enhance the quality of ESG ratings, outlining requirements for ESG rating providers operating within the EU and those established outside the EU who wish to offer services within the EU. The regulation also seeks to ensure the independence of ESG rating activities from political and economic influences.