In a draft report published on Friday 6 October, Aurore Lalucq (S&D, French), Member of the European Parliament, wants to increase the publication requirements for rating agencies on environmental, social and governance (ESG) criteria.
Presented in June by the European Commission (see EUROPE 13200/14), the proposed regulation is intended to establish a framework and provide greater transparency on the various CRA rating indices and define what they correspond to.
The rapporteur suggested that the methodology used by the rating agencies should be mentioned in their publications. There is financial materiality, which consists of assessing the risks and opportunities associated with environmental and social transformations, particularly on the company’s accounts, and impact materiality, which assesses the impact of the company’s activities on the environment and society.
“Rating agencies should also refrain from aggregating E, S and G ratings, as this could mask poor performance in one or other of these indicators”, said Ms Lalucq in the explanatory memorandum. She therefore suggests that, for each of these indicators, high-level minimum disclosure requirements be proposed with reference to the relevant international norms and standards. In addition, CRAs should clearly communicate the potential limitations of their ratings.
To encourage competition between ESG rating agencies, the rapporteur specifies that entities seeking to obtain several ratings should give priority to at least one supplier with a market share of less than 5%.
She also hopes to strengthen the provisions relating to the prevention of conflicts of interest and the authorisation and use of ratings from third countries.
Lastly, she wants rating agencies to actively incorporate the data standardised in the SFDR regulation on sustainable finance, the regulation on taxonomy and the ‘CSRD’ directive on corporate sustainability reporting into their assessments.
Read the draft report: https://aeur.eu/f/916 (Original version in French by Anne Damiani)