EU ESG Overhaul Puts S&P Ireland in Crosshairs
New laws in the European Union could cause issues for S&P Global because they might put strict rules on how ESG (Environmental, Social, Governance) ratings are done.
Right now, European regulators are figuring out rules that would make credit ratings agencies more open about how they judge companies' ESG performances. If companies break these rules, they could be fined up to 10% of their yearly income.
ESG ratings are important because they decide where investors put their money based on how companies handle ESG stuff. Some people say the system isn't clear and only looks at how companies manage ESG risks for their own benefit, not for the planet or society.
S&P Global, a big player in this ESG ratings world, is worried about these new rules. They think some parts are too strict, especially for larger companies, and might stop innovation in the industry.
One big problem is a rule saying ratings agencies can't advise investors or companies. S&P Global agrees that ESG ratings agencies shouldn't advise on ESG ratings, but they think stopping them from doing other financial services is too much and would be costly.
S&P Global has been talking to members of the European Parliament, including those from Ireland, where they have a business. They say these rules might affect their Dublin-based operations, which made €554 million in 2022 and had 21 employees.
Apart from worries about their Irish business, S&P Global also thinks the rules unfairly target bigger companies and could create confusion about how different firms' ESG ratings are regulated. They want a delay in these rules and say companies should get two years, not six months, to follow them. They also want the fines for breaking the rules to be lower, and they don't like the idea of limits on how much ESG ratings agencies can charge for their services.
In short, S&P Global is concerned that these new EU rules might cause problems for their business in Ireland and the whole ESG ratings industry. They're asking for more time to adapt and lower fines for mistakes, saying the rules could hurt innovation and make things confusing.
To view and compare company ESG Ratings and Sustainability Reports, visit our Company ESG Profiles page.
Source: Business Post