Environmental, Social and Governance (ESG) Ratings Activities Regulation

Edited by Andrea Miglionico, Associate Professor, School of Law, University of Reading, UK

‘This incisive book offers a clear-eyed examination of ESG ratings, exposing inconsistencies and critical challenges in measuring ESG practices and corporate efficiency. With insightful analysis of regulatory reforms and market dynamics, it’s essential reading for investors, policy-makers, and scholars seeking to understand the evolving landscape of ESG metrics, transparency, and accountability in sustainable finance.’

• ContentsPreface xixTable of cases xxivTable of legislation xxvTITLE I SUBJECT MATTER, SCOPE AND DEFINITIONS1 Subject matter 2Andrea Miglionico2 Scope 10Andrea Miglionico3 Definitions 20Andrea MiglionicoTITLE II PROVISION OF ESG RATINGS IN THE UNION4 Requirements to operate in the Union 32Iain MacNeil5 Temporary regime for small ESG rating providers 35Iain MacNeilChapter 1 Authorization of ESG rating providers established in the union to operate inthe Union6 Application for authorization to operate in the Union 39Iain MacNeil7 Examination by ESMA of the application for authorization to operate in the Union as an ESGrating provider 41Iain MacNeil8 Decision to grant or refuse authorization to operate in the Union and notification of thatdecision 43Iain MacNeil9 Suspension or withdrawal of authorization 45Iain MacNeilChapter 2 Equivalence, endorsement and recognition of ESG rating providersestablished outside the Union to operate in the Union10 Equivalence regime 48Iain MacNeil11 Endorsement of ESG ratings provided by ESG rating providers established outside theUnion 52Iain MacNeil12 Recognition of ESG rating providers established outside the Union 56Iain MacNeil13 Cooperation arrangements 60Iain MacNeilChapter 3 Register and accessibility of information14 Register of ESG rating providers and accessibility of information on the European singleaccess point 62Andrea MiglionicoTITLE III INTEGRITY AND RELIABILITY OF ESG RATING ACTIVITIESChapter 1 Organizational requirements, processes and documents concerning governance15 General principles 73Iris H-Y Chiu16 Separation of business and activities 101Iris H-Y Chiu17 Rating analysts, employees and other persons involved in the provision of ESG ratings 112Irene-marié Esser18 Record-keeping requirements 115Iris H-Y Chiu19 Complaints-handling mechanism 119Iris H-Y Chiu20 Reasoned concerns 126Iris H-Y Chiu21 Outsourcing 130Iris H-Y Chiu22 Exemptions from governance requirements 134Iris H-Y ChiuChapter 2 Transparency requirements23 Disclosure to the public of the methodologies, models and key rating assumptions used inESG rating activities 142Irene-marié Esser24 Disclosures to users of ESG ratings, rated items and issuers of rated items 148Irene-marié EsserChapter 3 Independence and conflicts of interest25 Independence and avoidance of conflicts of interest 153Irene-marié Esser26 Management of potential conflicts of interest arising from employees 157Irene-marié Esser27 Fair, reasonable, transparent and non-discriminatory treatment of users of ESG ratings 159Irene-marié EsserChapter 4 Supervision by ESMASection 1: General principles28 Non-interference with the contents of ratings or methodologies 163Francesco De Pascalis29 ESMA 169Francesco De Pascalis30 Competent authorities 176Francesco De Pascalis31 Exercise of the powers referred to in Articles 32, 33 and 34 182Francesco De Pascalis32 Requests for information 187Francesco De Pascalis33 General investigations 193Francesco De Pascalis34 On-site inspections 201Francesco De PascalisSection 2: Supervisory measures and penalties35 Supervisory measures by ESMA 209Andrea Miglionico36 Fines 217Andrea Miglionico37 Periodic penalty payments 221Andrea Miglionico38 Disclosure, nature, enforcement and allocation of fines and periodic penalty payments 226Andrea MiglionicoSection 3: Procedures and review39 Procedural rules for taking supervisory measures and imposing fines 231Andrea Miglionico40 Hearing of persons subject to investigations 236Andrea Miglionico41 Review by the Court of Justice of the European Union 240Andrea MiglionicoSection 4: Fees and delegation42 Supervisory fees 244Andrea MiglionicoChapter 5 Cooperation between ESMA and the competent authorities43 Delegation of tasks by ESMA to the competent authorities 248Andrea Miglionico44 Exchange of information 252Andrea Miglionico45 Notifications and suspension requests by the competent authorities 256Andrea Miglionico46 Professional secrecy 260Andrea MiglionicoTITLE IV DELEGATED AND IMPLEMENTING ACTS47 Exercise and revocation of the delegation and objections to delegated acts 265Andrea Miglionico48 Committee procedure 270Andrea Miglionico49 Amendment to Regulation (EU) 2019/2088 274Andrea Miglionico50 Amendment to Regulation (EU) 2023/2859 278Andrea MiglionicoTITLE V TRANSITIONAL AND FINAL PROVISIONS51 Transitional provisions 281Andrea Miglionico52 Review 284Andrea Miglionico53 Entry into force and application 288Andrea Miglionico