THE EU REGULATION FOR ESG RATING ACTIVITIES : THE MISSING PIECE OF SUSTAINABLE FINANCE Proposal for a Regulation on the transparency and integrity of ESG rating activities of 13 June 2023 and provisional agreement of 9 February 2024 : the missing piece of sustainable finance in UE Forthcoming Law and Financial Market Review (LFMR) 2024

Abstract

ESG ratings play an important role in helping companies and financial institutions integrate sustainability into their decision-making. This proposal for a Regulation on the transparency and integrity of ESG rating activities is therefore an essential component of the general European sustainable finance framework. Impartiality, transparency of methodologies, reliability, comparability, supervision by ESMA, a register of approved providers and the publishing of any sanctions online are the main tools of this text, with the aim of making the European ESG rating market more attractive. On 9 February 2024, the European Parliament and the Council reached a provisional political agreement called "Final Compromise Notation ESG" on the text of the ESG Ratings Regulation which has made some significant changes to the European Commission's proposal of 13 June 2023 1. General context of ESG ratings-Since 2019, the topic of ESG ratings has given rise to a large number of academic studies 2 which have highlighted the fact that these ratings often diverge from one provider to another even though they relate to the same companies. The proposal for a Regulation of the European Parliament and of the Council on the transparency and integrity of environmental, social and governance (ESG) rating activities of 13 June 2023 3 is therefore a major step towards the overall success of sustainable finance. It is one of the missing pieces in the large body of European regulations on sustainable finance 4 and undoubtedly a critical

Keywords: Sustainable Finance, ESG rating activities, EU regulation, ESMA,