With the regulation on environmental, social and governance (ESG) rating provider activities, the EU is the first jurisdiction in the world to move to regulate the ESG rating market. While credit ratings assess the default risk of a company, which can be influenced by ESG factors and other risks through various issues, ESG ratings assess the “sustainability” of companies. On 5 February 2024, the European Union (EU) published a draft proposal for the regulation of ESG ratings.
The EU Council and EU Parliament must approve the provisional political agreement before it can proceed with the formal adoption procedure. The regulation is anticipated to go into effect fully 18 months after it is enacted.
