ESMA raises the bar for credit rating agencies to deliver 'robust' ESG process

The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has launched a consultation on proposed amendments to its regulations on credit rating agencies in a bid to ensure a "better incorporation" of ESG factors in their credit rating methodologies.

The objective was also to achieve better "subsequent disclosure to the public, as well as to enhance transparency and credibility in the credit rating process", it said in a statement on 2 April.

More specifically ESMA said the aim was to ensure that the relevance of ESG factors within credit rating methodologies was subject to systematic documentation, to enhance disclosures on the relevance of ESG factors in credit ratings and rating outlooks, and deliver a more robust and transparent credit rating process through the consistent application of credit rating methodologies.

After the feedback on the Commission Delegated Regulation (EU) No 447/2012 and to Annex I of the Credit Rating Agencies Regulation (CRAR), ESMA said it will submit its technical advice to the European Commission by December 2024.