On 5 December 2023, the European Parliament announced that in the Economics and Monetary affairs committee MEPs, led by the rapporteur Aurore Lalucq (S&D, FR), voted in favour of significant changes to draft regulation proposed by the European Commission on environmental, social and governance (ESG) ratings.
The adopted report adds provisions to ensure that rating products should explicitly disclose the rated entity’s materiality. In this way, ESG raters are encouraged to address the material impact of the rated entity on the environment and society in general more than is currently the use.
ESG rating providers should also disclose information to the public on methodologies, models and key rating assumptions which those providers use in their ESG rating activities and in each of their ESG ratings product.
Furthermore, in a bid to encourage competition among ESG rating providers and fostering an environment where smaller rating providers can enter the market, an entity seeking to obtain more than one ESG rating should choose at least one ESG rating provider with a market share below 15%.