ESMA to Gain Authority in Green Ratings
The EU's securities and markets authority, ESMA, is set to gain additional oversight over providers of green ratings following a legislative agreement on Monday, February 5th.
This move marks a unique consolidation of financial-market authority within the EU, reflecting the response to increasing market interest in environmental, social, and governance (ESG) concerns.
Belgian finance minister Vincent Van Peteghem welcomed the legislation, highlighting the potential for increased investor confidence and its impact on fostering a more socially responsible and sustainable future.
The agreement was reached during late-stage legislative discussions known as a trilogue, involving lawmakers from the European Parliament and the EU’s Council, which is currently chaired by Belgium.
ESG ratings evaluate a company's performance based on various factors, such as its carbon footprint or labour practices within its supply chain. While these ratings are influential in guiding investment decisions, concerns have been raised regarding the transparency and clarity of methodologies.
The new EU rules aim to address these concerns and prevent conflicts of interest, drawing lessons from past financial crises and the dangers of greenwashing. The legislation seeks to ensure impartiality among ESG rating providers, particularly those offering consultancy services.
This initiative is part of the EU's broader efforts to combat greenwashing and enhance transparency in financial markets. It aligns with calls from figures like Christine Lagarde for increased EU financial-market powers, although resistance from member states has limited the scope of ESMA's supervision.
In parallel, discussions are ongoing regarding whether ESMA should be granted supervision powers over EU-based clearinghouses as part of EU market infrastructure rules.
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Source: euronews
