Activities of José Manuel GARCÍA-MARGALLO Y MARFIL related to 2023/0177(COD)
Shadow reports (1)
REPORT on 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
Amendments (58)
Amendment 121 #
Proposal for a regulation
Recital 15
Recital 15
(15) Rules on ESG rating providers should not apply to private ESG ratings produced pursuant to an individual order and provided exclusively to the person who placed the order and which are not intended for public disclosure or distribution by subscription or other means. Neither should such rules apply to ESG ratings produced by European financial undertakings that are used for internal purposes. ESG ratings developed by European or national authorities and by cmembers of the European System of Central bBanks (ESCB) should also be exempted from such rules. Finally, such rules should not apply to the provision of ESG data that do not include an element of rating or scoring and are not subject to any modelling or analysis resulting in the development of an ESG rating.
Amendment 123 #
Proposal for a regulation
Recital 16
Recital 16
(16) It is important to lay down rules ensuring that ESG ratings provided by ESG rating providers authorised in the Union are of adequate quality, are subject to appropriate requirements, recognizing the existence of different business models, and ensure market integrity. Those rules would apply to overall ESG ratings capturing Environmental, Social and Governance factors, and to ratings that are only looking at a single Environmental, Social or Governance factor or sub- component of that factor.
Amendment 131 #
Proposal for a regulation
Recital 20
Recital 20
(20) To ensure the quality and reliability of ESG ratings, ESG rating providers should use rating methodologies that are rigorous, systematic, objective, continuous and subject to validation. However, it is key to leave it to the ESG rating providers themselves to determine their own methodologies according to the above principles. ESG rating providers should review ESG ratings methodologies on an on-going basis and at least annually.
Amendment 136 #
Proposal for a regulation
Recital 21
Recital 21
(21) To ensure a higher-level transparency, ESG rating providers should disclose information to the public on the methodologies, models and key rating assumptions which those providers use in their ESG rating activities and in each of their ESG ratings product. In light of the uses of ESG ratings by investors, the rating products should explicitly disclose which dimension of the double materiality the rating addresses, whether it is both material financial risk to the rated entity and the material impact of the rated entity on the environment and society in general or whether it takes into account only one of them. They should also explicitly disclose whether the rating addresses other dimensions. For the same reason, ESG rating providers should provide more detailed information on the methodologies, models and key rating assumptions to subscribers of ESG ratings. That information should enable users of ESG ratings to perform their own due diligence when assessing whether to rely or not on those ESG ratings. Disclosure of information concerning models should however not reveal sensitive business information or impede innovation. The non-disclosure of information related to their intellectual capital, intellectual property and other information qualified as trade secrets, is key to the viability of these companies and the promotion of innovation.
Amendment 141 #
Proposal for a regulation
Recital 22
Recital 22
(22) ESG rating providers should ensure that they provide ESG ratings that are independent, objective and of adequate quality. It is important to introduce organisational requirements ensuring the prevention and mitigation of potential conflicts of interests. To ensure their independence, ESG rating providers should avoid situations of conflict of interest and manage those conflicts adequately where they are unavoidable. ESG rating providers should disclose conflicts of interest in a timely manner. They should also keep records of all significant threats to the independence of the ESG rating provider and that of its employees and other persons involved in the rating process, and the safeguards applied to mitigate those threats. In addition, to avoid potential conflicts of interest, ESG rating providers should not be allowed to offer a number of other services including consulting services, credit ratings, benchmarks, investment activities, audit, or banking, insurance and reinsuranceconsulting services and audit activities. Finally, to prevent, identify, eliminate or manage and disclose any conflicts of interest and ensure the quality, integrity and thoroughness of the ESG rating and review process at all times, ESG rating providers should establish appropriate internal policies and procedures in relation to employees and other persons involved in the rating process. Such policies and procedures should, in particular, include internal control mechanisms and a compliance function.
Amendment 156 #
Proposal for a regulation
Article 2 – paragraph 2 – point b
Article 2 – paragraph 2 – point b
(b) ESG ratings produced by regulated financial undertakings in the Union that are neither published nor provided to clients and are used for internal purposes or for providing in-house financial services and products, including services to other entities that are part of the same group;
Amendment 180 #
Proposal for a regulation
Article 2 – paragraph 2 – point i – introductory part
Article 2 – paragraph 2 – point i – introductory part
(i) ESG ratings produced by cmembers of the European System of Central bBanks (ESCB) that fulfil all of the following conditions:
Amendment 183 #
Proposal for a regulation
Article 2 – paragraph 2 – point i – point b
Article 2 – paragraph 2 – point i – point b
(b) they are not disclosed to the publicproduced or disseminated for commercial purposes;
Amendment 185 #
Proposal for a regulation
Article 2 – paragraph 2 – point i – point c
Article 2 – paragraph 2 – point i – point c
Amendment 187 #
Proposal for a regulation
Article 2 – paragraph 2 – point i – point d
Article 2 – paragraph 2 – point i – point d
Amendment 198 #
Proposal for a regulation
Article 3 – paragraph 1 – point 1
Article 3 – paragraph 1 – point 1
(1) ‘ESG rating’ means an opinion, a score or a combination of both, regarding an entity, a financial instrument, a financial product, or an undertaking’s ESGnvironmental, Social and/or Governance profile or characteristics or exposure to ESG risks or the impact on people, society and the environment, that are based on both an established methodology and defined ranking system of rating categories and that are provided to third parties, irrespective of whether such ESG rating is explicitly labelled as ‘rating’ or ‘ESG score’;
Amendment 200 #
Proposal for a regulation
Article 3 – paragraph 1 – point 1
Article 3 – paragraph 1 – point 1
(1) ‘ESG rating’ means an ESG opinion, a ESG score or a combination of both, regarding an entity, a financial instrument, a financial product, or an undertaking’s ESG profile or characteristics or exposure to ESG risks or the impact on people, society and the environment, that are based on an established methodology and defined ranking system of rating categories and that are provided to third parties, irrespective of whether such ESG rating is explicitly labelled as ‘rating’ or ‘ESG score’;
Amendment 204 #
Proposal for a regulation
Article 3 – paragraph 1 – point 2
Article 3 – paragraph 1 – point 2
(2) ‘ESG opinion’ means an ESG assessment that based on a rules-based methodology and defined ranking system of rating categories, involving directly a rating analyst in the rating process or systems process;
Amendment 206 #
Proposal for a regulation
Article 3 – paragraph 1 – point 3
Article 3 – paragraph 1 – point 3
(3) ‘ESG score’ means a ESG measure derived from data, using a rule-based methodology, and based only on a pre- established statistical or algorithmic system or model, without any additional substantial analytical input from an analyst;
Amendment 237 #
Proposal for a regulation
Article 6 – paragraph 5 a (new)
Article 6 – paragraph 5 a (new)
5 a. After its notification according to Article 48(1), the rating provider shall be registered as temporarily authorised in the register referred to in Article 13 and be permitted to continue providing services in the Union until its application has been approved or denied.
Amendment 247 #
Proposal for a regulation
Article 9 – paragraph 1 – point d a (new)
Article 9 – paragraph 1 – point d a (new)
(d a) establishment in the EU would be disproportionate to the nature scale and complexity of the ESG rating providers' ESG rating activities in the EU;
Amendment 249 #
Proposal for a regulation
Article 9 – paragraph 1 – point d b (new)
Article 9 – paragraph 1 – point d b (new)
(d b) the third country rating provider has been authorised by ESMA in accordance with Article 5.
Amendment 255 #
Proposal for a regulation
Article 9 – paragraph 2 – subparagraph 2
Article 9 – paragraph 2 – subparagraph 2
For the purposes of point (a), the Commission shall take into account whether the legal framework and supervisory practice of a third country ensures at least compliance with the IOSCO recommendations for ESG Ratings published in November 2021.
Amendment 267 #
Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 2
Article 10 – paragraph 1 – subparagraph 2
For the purposes of point (b) of the first subparagraph, ESMA may consider as a baseline that compliance of the provision of the ESG rating to be endorsed with the IOSCO recommendations for ESG ratings is equivalent to compliance with the requirements of this Regulation.
Amendment 270 #
Proposal for a regulation
Article 10 – paragraph 3
Article 10 – paragraph 3
3. Within 930 working days of receipt of the application for endorsement referred to in paragraph 1, ESMA shall examine the application and decide eitassess whether the application is complete. Where the application is not complete, ESMA shall notify the ESG rating provider that applied for endorsement and shall set a deadline by which the ESG rating provider that applied for endorsement is to provide additional information. Where to authorise the endorsement or to refuse ithe application is complete, ESMA shall notify the ESG rating provider. Within 45 working days of receipt of a complete application for recognition, ESMA shall verify that the requirements laid down in paragraphs 1 and 2 are fulfilled. ESMA shall publicly notify the decision to endorse provided by a third country ESG rating provider.
Amendment 284 #
Proposal for a regulation
Article 11 – paragraph 2 – subparagraph 1
Article 11 – paragraph 2 – subparagraph 1
Third country ESG rating providers that wish to be recognised as referred to in paragraph 1 shall comply with the requirements established in this Regulation and apply for recognition to ESMA. ESG rating providers may fulfil that condition by applying the IOSCO recommendations on ESG ratings provWhen ESMA assesses whether third country ESG providers comply with the requirements of this Regulation, it shall considedr that suche application is equivalent to compliance with the requirements established in this Regulationof the IOSCO recommendations as the minimum standard.
Amendment 286 #
Proposal for a regulation
Article 12 a (new)
Article 12 a (new)
Article12a Third country regime review 1. ESMA shall submit a report to the European Parliament, the Council and the Commission by [three years after the date of entry into force of this Regulation] on the adequacy of the requirements of Articles 9, 10 and 11 in order that third- country ESG rating providers may offer ther services in the European Union. 2. The Comission shall consider the results of the report and submit, where appropriate, a legislative proposal.
Amendment 288 #
Proposal for a regulation
Article 13 – paragraph 8 – subparagraph 2
Article 13 – paragraph 8 – subparagraph 2
Before developing the draft implementing technical standards, ESMA shall carry out a cost-benefit analysis. For the purposes of point (c), ESMA shall assess the advantages and disadvantages of different machine-readable formats and conduct appropriate field tests in cooperation with ESG rating providers.
Amendment 299 #
Proposal for a regulation
Article 14 – paragraph 8
Article 14 – paragraph 8
8. ESG rating providers shall review the rating methodologies referred to in paragraph 67 on an on-going basis and at least annually.
Amendment 310 #
Proposal for a regulation
Article 15 – paragraph 1 – introductory part
Article 15 – paragraph 1 – introductory part
1. ESG rating providers shall not provide any of the followingconsulting activity to investors or undertakings nor any audit activities:y.
Amendment 312 #
Proposal for a regulation
Article 15 – paragraph 1 – point a
Article 15 – paragraph 1 – point a
Amendment 315 #
Proposal for a regulation
Article 15 – paragraph 1 – point b
Article 15 – paragraph 1 – point b
Amendment 319 #
Proposal for a regulation
Article 15 – paragraph 1 – point c
Article 15 – paragraph 1 – point c
Amendment 323 #
Proposal for a regulation
Article 15 – paragraph 1 – point d
Article 15 – paragraph 1 – point d
Amendment 325 #
Proposal for a regulation
Article 15 – paragraph 1 – point e
Article 15 – paragraph 1 – point e
Amendment 326 #
Proposal for a regulation
Article 15 – paragraph 1 – point f
Article 15 – paragraph 1 – point f
Amendment 329 #
Proposal for a regulation
Article 15 – paragraph 1 a (new)
Article 15 – paragraph 1 a (new)
Amendment 331 #
Proposal for a regulation
Article 15 – paragraph 2
Article 15 – paragraph 2
2. ESG rating providers shall ensure that the provision of other services than those referred to in paragraph 1 and 1a does not create risks of conflicts of interest within its ESG rating activities.
Amendment 336 #
Proposal for a regulation
Article 16 – paragraph 1
Article 16 – paragraph 1
1. ESG rating providers shall ensure that rating analysts, employees and any other natural person whose services are placed at its disposal or under its control and who are directly involved in the provision of ESG ratings, including analysts directly involved in the rating process and persons involved in the provision of scores, are appropriately trained and have the knowledge and experience that is necessary for the performance of the duties and tasks assigned.
Amendment 342 #
Proposal for a regulation
Article 16 – paragraph 8
Article 16 – paragraph 8
8. Persons as referred to in paragraph 1 shall not take up a key management position within a rated entity which they have been involved in rating for six monthsone year after the provision of such rating.
Amendment 351 #
Proposal for a regulation
Article 18 – paragraph 1
Article 18 – paragraph 1
1. ESG rating providers shall have in place and publish on their website procedures for receiving, investigating and retaining records concerning non- anonymous complaints made.
Amendment 353 #
Proposal for a regulation
Article 18 – paragraph 2 – point a – point 5
Article 18 – paragraph 2 – point a – point 5
(5) other decisions in relation to the ESG rating that appear inconsistent with the applicable methodologies, policies or procedures of the ESG rating provider;
Amendment 362 #
Proposal for a regulation
Article 19 – paragraph 1
Article 19 – paragraph 1
1. ESG rating providers shall not oOutsourceing of important operational functions where such outsourcing wouldshall not materially impair the quality of the ESG rating provider’s internal control policies and procedures, orand the ability of the European Supervisory and Markets Authority (ESMA) to supervise the ESG rating provider’s compliance with its obligations under this Regulation.
Amendment 367 #
Proposal for a regulation
Article 20 – paragraph 1 – point a
Article 20 – paragraph 1 – point a
(a) the ESG rating provider is a small or medium-sized undertaking according to the criteria laid down in Article 3 of Directive 2013/34/EU;
Amendment 376 #
Proposal for a regulation
Article 21 – paragraph 1
Article 21 – paragraph 1
1. ESG rating providers shall disclose on their website, as a minimum, the methodologies, models and key rating assumptions they use in their ESG rating activities, including the information referred to in point 1 of Annex III.
Amendment 383 #
Proposal for a regulation
Article 21 – paragraph 3 a (new)
Article 21 – paragraph 3 a (new)
3 a. ESMA shall develop draft implementing technical standards to specify the data standards and formats for the elements that are to be disclosed in accordance with paragraph 1. ESMA shall submit those draft implementing technical standards to the Commission by XX XXXX XXXX
Amendment 389 #
Proposal for a regulation
Article 22 – paragraph 3 a (new)
Article 22 – paragraph 3 a (new)
3 a. ESMA shall develop draft implementing technical standards to specify the data standards and formats for the elements that are to be disclosed in accordance with paragraph 1. ESMA shall submit those draft implementing technical standards to the Commission by XX XXXX XXXX
Amendment 397 #
Proposal for a regulation
Article 23 – paragraph 3 – subparagraph 1
Article 23 – paragraph 3 – subparagraph 1
Where there is a risk of a conflict of interest within an ESG rating provider due to the ownership structure, controlling interests, or activities of that ESG rating provider, of any entity owning or controlling the ESG rating provider, of an entity that is owned or controlled by the ESG rating provider, or of any the ESG rating provider’s affiliates, ESMA may require the ESG rating provider to take measures to mitigate that risk. Such measures may include the establishment of an independent oversight function representing stakeholders, including users of the ESG ratings and contributors to such ratings, in a balanced manner.
Amendment 401 #
Proposal for a regulation
Article 23 – paragraph 3 – subparagraph 2
Article 23 – paragraph 3 – subparagraph 2
Where a conflict of interest as referred to in the first subparagraph cannot be adequately managed, ESMA mayshall require the ESG rating provider to cease the activities or relationships that create the conflict of interest, or mayshall require the ESG rating provider to cease providing the ESG ratings.
Amendment 404 #
Proposal for a regulation
Article 24 – paragraph 2
Article 24 – paragraph 2
2. ESG rating providers shall establish specific internal control procedures to ensure the integrity and reliability of the employee or person determining the ESG rating, including internal sign-off by management before the dissemination of the ESG rating. ESMA may require ESG rating providers to provide information about these control procedures.
Amendment 409 #
Proposal for a regulation
Article 25 – paragraph 1
Article 25 – paragraph 1
1. ESG rating providers shall take steps that are adequate to ensure that fees charged to clients are fair, reasonable, transparent, and non-discriminatory and are based on costs.
Amendment 413 #
Proposal for a regulation
Article 25 – paragraph 2
Article 25 – paragraph 2
2. For the purposes of paragraph 1, ESMA may require ESG rating providers to provide it with documented evidence, may take supervisory measures in accordance with Article 33, and may decide to impose fines in accordance with Article 34 where it finds that fees from ESG rating providers are not fair, reasonable, transparent, and non- discriminatory and not based on actual costs.
Amendment 425 #
Proposal for a regulation
Article 31 – paragraph 1 – point c
Article 31 – paragraph 1 – point c
(c) summon and ask any person referred to in Article 30(1),or their representatives or staff for oral or written explanations on facts or documents related to the subject matter and purpose of the inspecvestigation and to record the answers;
Amendment 427 #
Proposal for a regulation
Article 32 – paragraph 1
Article 32 – paragraph 1
1. In order to carry out its duties under this Regulation, ESMA may conduct all necessary on-site inspections at the business premises and land of the legal persons referred to in Article 30(1). Where the proper conduct and efficiency of the inspection so require, ESMA may carry out the on-site inspection without prior announcement.
Amendment 430 #
Proposal for a regulation
Article 33 – paragraph 1 – introductory part
Article 33 – paragraph 1 – introductory part
1. Where ESMA’ finds that a ESG rating provider has not complied with its obligations under this Regulation, it shall require the ESG rating provider to bring the infrigement to an end. In addition, ESMA may take one or more of the following supervisory measures:
Amendment 432 #
Proposal for a regulation
Article 33 – paragraph 1 – point d
Article 33 – paragraph 1 – point d
Amendment 438 #
Proposal for a regulation
Article 34 – paragraph 1 a (new)
Article 34 – paragraph 1 a (new)
1a. An infringement shall be considered to have been committed intentionally if ESMA finds objectives which demonstrate that a person acted deliberately to commit the infringement.
Amendment 451 #
Proposal for a regulation
Article 42 – paragraph 1
Article 42 – paragraph 1
ESMA and the competent authorities, shall, without undue delay, provide each other with the information required for carrying out their duties under this Regulation or under their respective supervisory responsability.
Amendment 459 #
Proposal for a regulation
Article 48 – paragraph 1
Article 48 – paragraph 1
Amendment 466 #
Proposal for a regulation
Article 49 – paragraph 3 a (new)
Article 49 – paragraph 3 a (new)
3 a. ESMA shall submit a report to the European Parliament, to the Council and to the Commission by [three years after entry into force of this Regulation], assessing whether the scope of this Regulation is sufficient to ensure confidence in the market and reach its objectives, including the need to extend the scope to ESG data providers. The report may be accompanied, if appropriate, by a legislative proposal.
Amendment 469 #
Proposal for a regulation
Article 50 – paragraph 2
Article 50 – paragraph 2
It shall apply from [612 months after the entry into force of this Regulation].
Amendment 474 #
(j a) where applicable, a provisional list of the class of ESG rating the ESG rating provider expects to endorse;
Amendment 507 #
Proposal for a regulation
Annex III – Part 2 – paragraph 1 – point a – point 7 a (new)
Annex III – Part 2 – paragraph 1 – point a – point 7 a (new)
(7 a) timing of data used for evaluation.