2023/0177(COD) | [ParlTrack]

Proposal for a regulation
Recital 1

(1) On 25 September 2015, the UN General Assembly adopted a new global sustainable development framework: the 2030 Agenda for Sustainable Development17 , having at its core the Sustainable Development Goals (SDGs). The Commission's Communication of 2016 on the next steps for a sustainable European future18 links the SDGs to the Union policy framework to ensure that all Union actions and policy initiatives, within the Union and globally, take the SDGs on board at the outset. The European Council conclusions of 20 June 201719 confirmed the commitment of the Union and the Member States to the implementation of the 2030 Agenda in a full, coherent, comprehensive, integrated and effective manner and in close cooperation with partners and other stakeholders. On 11 December 2019, the Commission published its communication on ‘The European Green Deal’20 . On 30 June 2021, the Council of the European Union and the European Parliament agreed on the European Climate Law which enshrines into law the goal set out in the European Green Deal for Europe's economy and society to become climate- neutral by 2050. _________________ 17 Transforming our World: The 2030 Agenda for Sustainable Development (UN 2015). 18 COM(2016) 739 final. 19 CO EUR 17, CONCL. 5. 20 Communication from the Commission of 11 December 2019 on the European Green Deal, COM(2019) 640 final.

Amendment 101 #

Proposal for a regulation
Recital 2

(2) The transition to a sustainable economy is key to ensuring the overall long-term ~~competitiveness of the Union economy~~sustainability of the Union and the quality of life of people in the Union as well as to adhering to the Union environmental and social objectives and commitments under the Paris Agreement, the 2030 Agenda for Sustainable Development, the European Green Deal and the European Pillar of Social Rights. Sustainability has long been at the heart of the Union project and the Union Treaties give recognition to the importance of its social and environmental dimensions.

Amendment 102 #

Proposal for a regulation
Recital 3

(3) Achieving SDG objectives in the Union requires the channelling of capital flows towards sustainable investments. It is important to exploit fully the potential of the internal market for the achievement of those goals, while balancing these objectives with economic concerns. In that context, it is crucial to remove obstacles to the efficient movement of capital towards sustainable investments in the internal market and to prevent such obstacles from emerging.

Amendment 103 #

Proposal for a regulation
Recital 3

(3) Achieving SDG objectives in the Union requires the channelling of capital flows towards sustainable investments and de-incentivising unsustainable investments and through this, transferring investments from significant harm and unsustainable to sustainable. It is important to exploit fully the potential of the internal market for the achievement of those goals. In that context, it is crucial to remove obstacles to the efficient movement of capital towards sustainable investments in the internal market and to prevent such obstacles from emerging.

Amendment 104 #

Proposal for a regulation
Recital 3

(3) Achieving SDG objectives in the Union requires the channelling of capital flows towards sustainable investments. It is ~~important~~necessary to exploit fully the potential of the internal market for the achievement of those goals. In that context, it is crucial to remove obstacles to the efficient movement of capital towards sustainable investments in the internal market and to prevent such obstacles from emerging.

Amendment 105 #

Proposal for a regulation
Recital 4

(4) The EU’s approach to sustainable and inclusive growth is anchored in the 20 principles of the European Pillar of Social Rights ~~to ensure a fair transition towards this goal and policies which leave no one behind~~, which enables EU coodination but also respects the principle of subsidiarity in social and employment policies. Furthermore, the EU social acquis including the Union of Equality Strategies21 provides standards in the areas of labour law, equality, accessibility, health and safety at work, and anti-discrimination. _________________ 21 Gender equality strategy; LGBTIQ equality strategy; Roma strategic framework; Strategy for the Rights of Persons with Disability.

Amendment 106 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Recital 5

(5) Financial markets have a crucial role in the channelling of capital toward investments necessary for the achievement of the EU climate and environmental objectives. In March 2018, the Commission published its Action Plan 'Financing Sustainable Growth'22 , setting up its strategy on sustainable finance. The objectives of that Action Plan are to mainstream sustainability factors into risk management and reorient capital flows towards sustainable investment to achieve sustainable and inclusive growth. _________________ 22 European Commission, Action Plan: Financing Sustainable Growth, COM(2018) 97 final.

Amendment 107 #

Proposal for a regulation
Recital 6

(6) As part of the Action Plan, the Commission commissioned a study entitled “Study on Sustainability Related Ratings, Data and Research”23 to take stock of the developments in the sustainability-related products and services market, identify the main market participants and highlight potential shortcomings. That study provided an inventory and classification of market actors, sustainability products and services available in the market and an analysis of the use and perceived quality of sustainability-related products and services by market participants. The study highlighted the lack of transparency and accuracy of Environmental, Social and Governance (‘ESG’) ratings methodologies and the lack of clarity over the operations of ESG rating ~~providers.~~s and ESG data products providers. (Amendment also applied to recitals 11, 13, 14, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 29, 30: ESG ratings and ESG data products providers.) _________________ 23 European Commission, Directorate- General for Financial Stability, Financial Services and Capital Markets Union, Study on sustainability-related ratings, data and research, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2874/14850.

Amendment 108 #

Proposal for a regulation
Recital 8

(8) As a follow-up, the Commission announced in the renewed sustainable finance strategy, a public consultation on ESG ratings to feed into an impact assessment. In the public consultation that took place in 2022, stakeholders confirmed concerns with the lack of transparency of ESG ratings methodologies and objectives and clarity over ESG rating activities. As trust is pivotal in the functioning of financial markets, this lack of transparency and reliability of ESG ratings should be addressed urgently.

Amendment 109 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Recital 8 a (new)

(8 a) As part of the sustainable finance strategy, several legislative initiatives, such as the sustainability-related disclosures in the financial services sector (Regulation (EU) 2019/2088 of the European Parliament and of the Council), the establishment of the taxonomy (Regulation (EU) 2020/852 of the European Parliament and of the Council) or the corporate sustainability reporting (Directive (EU) 2022/2464 of the European Parliament and of the Council) should enhance the availability and quality of ESG data and contribute to the continuous improvement of ESG ratings’ quality.

Amendment 110 #

Proposal for a regulation
Recital 9

(9) At international level, the International Organization of Securities Commissions (‘IOSCO’) has issued a report in November 2021 containing a set of recommendations on ESG ratings and data products providers25 . _________________ 25 IOSCO Report on ESG ratings and data products providers, available at: https://www.iosco.org/library/pubdocs/pdf/ IOSCOPD690.pdf.

Amendment 111 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Recital 10

(10) ESG ratings and ESG data products play an important role in global capital markets, as investors, borrowers and issuers increasingly use those ESG ratings as part of making informed, sustainable investment and financing decisions. Credit institutions, investment firms, insurance undertakings, assurance undertakings, and reinsurance undertakings, amongst others, often use those ESG ratings and ESG data products as a reference for the sustainability performance or for the sustainability risks and opportunities in their investment activity. Consequently, ESG ratings and ESG data products have a significant impact on the operation of the markets and on the trust and confidence of investors and consumers. To ensure that ESG ratings and ESG data products used in the Union are independent, objective and of adequate quality, it is important that ESG rating and ESG data products activities are conducted in accordance with the principles of integrity, transparency, responsibility, and good governance. Better comparability and increased reliability of ESG ratings and ESG data products would enhance the efficiency of that fast-growing market, thereby facilitating progress towards the objectives of the Green Deal. ESG data products can cover ESG “processed data”, including estimates or proxies of missing raw data from a company’s report. Processed ESG data are subject to a methodology applied by the provider that can be based on models or assumptions but may not qualify as ratings in the absence of a ranking system. Therefore processed ESG data should be subject to transparency requirements similarly to ESG ratings. ESG data products can also cover ESG “raw data” that do not need a specific methodology, model or assumption as they would generally come from the issuing entity, through its public report if available, or from responses to questionnaires or other sources. In such a case, there is no specific requirement of transparency over a methodology but the requirements of reliability, integrity, responsibility and good governance should apply in relation to the collection, formatting and re-dissemination of such data by the ESG data product provider.

Amendment 112 #

Proposal for a regulation
Recital 10

(10) ESG ratings play an important role in global capital markets, as investors, borrowers and issuers increasingly use those ESG ratings as part of making informed, sustainable investment and financing decisions. Credit institutions, investment firms, insurance undertakings, ~~assurance undertakings,~~ and reinsurance undertakings, amongst others, often use those ESG ratings as a reference for the sustainability performance or for the sustainability risks and opportunities in their investment activity. Consequently, ESG ratings have a significant impact on the operation of the markets and on the trust and confidence of investors and consumers. To ensure that ESG ratings used in the Union are independent, objective, comparable and of adequate quality, it is important that ESG rating activities are conducted in accordance with the principles of integrity, transparency, responsibility, ~~and~~ good governance and are elaborated in accordance with minimum standards. Better comparability and increased reliability of ESG ratings would enhance the efficiency of that fast-growing market, thereby facilitating progress towards the objectives of the Green Deal.

Amendment 113 #

Proposal for a regulation
Recital 10

(10) ESG ratings play an important role in global capital markets, as investors, borrowers and issuers increasingly use those ESG ratings as part of making informed, sustainable investment and financing decisions. Credit institutions, investment firms, insurance undertakings, assurance undertakings, and reinsurance undertakings, amongst others, often use those ESG ratings as a reference for the sustainability performance or for the sustainability risks and opportunities in their investment activity. Consequently, ESG ratings have a significant impact on the operation of the markets and on the trust and confidence of investors and consumers. To ensure that ESG ratings used in the Union are independent~~, objective~~ and of adequate quality, it is important that ESG rating activities are conducted in accordance with the principles of integrity, transparency, responsibility, and good governance. Better comparability and increased reliability of ESG ratings would enhance the efficiency of that fast-growing market, thereby facilitating progress towards the objectives of the Green Deal.

Amendment 114 #

Proposal for a regulation
Recital 10

(10) ESG ratings play an important role in global capital markets, as investors, borrowers and issuers increasingly use those ESG ratings as part of making informed, sustainable investment and financing decisions. Credit institutions, investment firms, insurance undertakings, assurance undertakings, and reinsurance undertakings, amongst others, often use those ESG ratings as a reference for the sustainability performance or for the sustainability risks and opportunities in their investment activity. Consequently, ESG ratings have a significant impact on the operation of the markets and on the trust and confidence of investors and consumers. To ensure that ESG ratings used in the Union are independent~~, objective~~ and of adequate quality, it is important that ESG rating activities are conducted in accordance with the principles of integrity, transparency, responsibility, and good governance. Better comparability and increased reliability of ESG ratings would enhance the efficiency of that fast-growing market, thereby facilitating progress towards the objectives of the Green Deal. (This amendment applies throughout the text in the context of describing the desired characteristics of ESG ratings.)

Amendment 115 #

Proposal for a regulation
Recital 12

(12) It is necessary to acknowledge the various business models of the ESG rating market. A first business model is the user- paid model, where users are mainly investors that purchase ESG ratings for investment decisions. A second business model is the issuer-pay model, where undertakings purchase ESG ratings for assessing risks and opportunities with their operations. The different business models lead to different types of conflicts of interests which need to be managed accordingly.

Amendment 116 #

Proposal for a regulation
Recital 12 a (new)

(12 a) Aside from their use in the financial services sector, ESG rating assessments are also used in the procurement and supply chain context. Therefore, ESMA should take account of the distinction between ESG ratings providers in the financial sectors and non-financial sectors in its supervision of ESG rating providers.

Amendment 117 #

Proposal for a regulation
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~~regulated financial undertakings that ~~are used for internal purposes~~may be, inter alia: i) used for internal purposes, or ii) provided externally as, or as part of, a product or service that is regulated by existing EU regulations or third country equivalents, such as Regulation (EU) 2019/2088 (SFDR), Regulation (EU) No 596/2014 (MAR), Directive 2014/65/EU (MiFID II) and Regulation (EU) 2019/2089 (Low Carbon Benchmark Regulation), or iii) used for providing in-house financial services and products, or iv) provided to intra-group entities included in the accounting consolidated group or to the assets under management of the group. ESG ratings developed by European or national authorities and by central banks 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 118 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
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 exclusively for internal purposes. ESMA should develop draft regulatory standards to strictly deliminate what constitutes an internal use. To preserve the level playing field, ESMA should ensure that the exclusion does not apply to ESG ratings provided by a financial undertaking to other parties, including parties belonging to the same group. ESG ratings developed by European or national authorities and by central banks should also be exempted from such rules. Likewise, this Regulation should not apply to non-profit civil society organisations or academics or journalists putting together scoreboards or rankings for non-commercial purposes, which represent a non-significant part of their overall activities. 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 119 #

Proposal for a regulation
Recital 15

(15) Rules on ESG ratings and ESG data products providers should not apply to private ESG ratings or ESG data 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 and ESG data produced by European financial undertakings that are used for internal purposes. ESG ratings developed by European or national authorities and by central banks 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 scor, or shared within their group, or provided or disclosed as required by or derived from the regulation applicable to EU financial undertakings, services or products, or as an element in conjunction with, and limited to, their regulated financial products or services. ESG ratings and ~~are not subject to any modelling or analysis resulting in the development of an ESG rating~~ESG data developed by European or national authorities and by central banks should also be exempted from such rules.

Amendment 120 #

Proposal for a regulation
Recital 15

Amendment 121 #

Proposal for a regulation
Recital 15

Amendment 122 #

Proposal for a regulation
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 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. When providing aggregated ratings, the ESG ratings providers should disclose and justify the rate and the weight granted to each component (E, S and G), taking into account that each component should receive a minimum weight of 20%.

Amendment 123 #

Proposal for a regulation
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 124 #

Proposal for a regulation
Recital 16

Amendment 125 #

Proposal for a regulation
Recital 16 a (new)

(16 a) ESG and ethical considerations are not a novel concept for businesses; they have held significant importance even before formal bureaucratic requirements. Every company aspiring to achieve long-term success has long recognised that it is no longer sufficient to solely focus on shareholder value but equally crucial to consider stakeholder value. Deception or unethical treatment of customers will inevitably jeopardize the sustainable success of a company over time. Inadequate treatment of employees within a company negatively affects their performance and may lead to employee turnover. Furthermore, any violation of legal regulations exposes the company to substantial legal and financial risks, including potential liability claims and the jeopardy of the company's existence. Misleading shareholders ultimately leads to regulatory sanctions in the stock market.

Amendment 126 #

Proposal for a regulation
Recital 17

(17) Given the use of ESG ratings from providers located outside the Union, it is necessary to introduce requirements based on which third-country ESG rating providers may offer their services in the Union. This is necessary to ensure market integrity, investor protection and proper enforcement. Therefore, t~~hree~~wo possible regimes are proposed for those third countries ESG rating providers: equivalence, and endorsement ~~and recognition~~. As an overarching principle, supervision and regulation in a third country should be equivalent to Union supervision and regulation of ESG ratings. Therefore, ESG ratings provided by an ESG rating provider located in a third country can only be offered in the Union where a positive decision on equivalence of the third- country regime has been taken by the Commission. However, to avoid any adverse impact resulting from a possible abrupt cessation of the offering in the Union of ESG ratings provided by a third country ESG rating provider, it is also necessary to provide for certain other mechanisms, that is endorsement and recognition. Any ESG rating provider with a group structure should be able to use the mechanism of endorsement for the ESG ratings developed outside the Union, provided they establish, within the group, an authorised ESG rating provider in the Union. Smaller ESG rating providers, within the meaning of the maximum threshold of net turnover to define small undertakings in Directive 2013/34/EU26 , that generally do not belong to a group, and may not have the means to have a legal entity authorised in the Union, should be able to continue or start offering their services in the Union and should therefore benefit from a lighter regime, that is recognition. Where the third country ESG provider is subject to supervision, appropriate cooperation arrangements should be put in place in order to ensure the proper exchange of information with the relevant competent authority of the third country. _________________ 26 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

Amendment 127 #

Proposal for a regulation
Recital 17

(17) Given the use of ESG ratings from providers located outside the Union, it is necessary to introduce requirements based on which third-country ESG rating providers may offer their services in the Union. This is necessary to ensure market integrity, investor protection and proper enforcement. Therefore, three possible regimes are proposed for those third countries ESG rating providers: equivalence, endorsement and recognition. As an overarching principle, supervision and regulation in a third country should be equivalent to Union supervision and regulation of ESG ratings. Therefore, ESG ratings provided by an ESG rating provider located in a third country can only be offered in the Union where a positive decision on equivalence of the third- country regime has been taken by the Commission. However, to avoid any adverse impact resulting from a possible abrupt cessation of the offering in the Union of ESG ratings provided by a third country ESG rating provider, it is also necessary to provide for certain other mechanisms, that is endorsement and recognition. Any ESG rating provider with a group structure should be able to use the mechanism of endorsement for the ESG ratings developed outside the Union, provided they establish, within the group, an authorised ESG rating provider in the Union. Smaller ESG rating providers, within the meaning of the maximum threshold of net turnover to define small undertakings in Directive 2013/34/EU26 , that generally do not belong to a group, and may not have the means to have a legal entity authorised in the Union, should be able to continue or start offering their services in the Union and should therefore benefit from a lighter regime, that is recognition. Where the third country ESG provider is subject to supervision, appropriate cooperation arrangements should be put in place in order to ensure the proper exchange of information with the relevant competent authority of the third country. _________________ 26 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

Amendment 128 #

Proposal for a regulation
Recital 17

(17) Given the use of ESG ratings from providers located outside the Union, it is necessary to introduce requirements based on which third-country ESG rating providers may offer their services in the Union. This is necessary to ensure market integrity, investor protection and proper enforcement. There are objective reasons why a third country ESG rating provider has to provide the ESG rating and why that ESG rating should be endorsed for use in the Union, including proximity to the issuer, a particular industry, centres of excellence for sub-components of ESG factors, expertise of staff employed outside the EU, and the development of ratings through the collaboration of global teams . Therefore, three possible regimes are proposed for those third countries ESG rating providers: equivalence, endorsement and recognition. As an overarching principle, supervision and regulation in a third country should be equivalent to Union supervision and regulation of ESG ratings. Therefore, ESG ratings provided by an ESG rating provider located in a third country can only be offered in the Union where a positive decision on equivalence of the third- country regime has been taken by the Commission. However, to avoid any adverse impact resulting from a possible abrupt cessation of the offering in the Union of ESG ratings provided by a third country ESG rating provider, it is also necessary to provide for certain other mechanisms, that is endorsement and recognition. Any ESG rating provider with a group structure should be able to use the mechanism of endorsement for the ESG ratings developed outside the Union, provided they establish, within the group, an authorised ESG rating provider in the Union. Smaller ESG rating providers, within the meaning of the maximum threshold of net turnover in the Union to define small undertakings in Directive 2013/34/EU26 , that generally do not belong to a group, and may not have the means to have a legal entity authorised in the Union, should be able to continue or start offering their services in the Union and should therefore benefit from a lighter regime, that is recognition. Where the third country ESG provider is subject to supervision, appropriate cooperation arrangements should be put in place in order to ensure the proper exchange of information with the relevant competent authority of the third country. _________________ 26 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

Amendment 129 #

Proposal for a regulation
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. ~~ESG rating providers should review ESG ratings methodologies on an on-going basis and at least annually.~~ Therefore, these methodologies should be developed in accordance with the minimum requirements set out in this Regulation. As a matter of principle, an ESG rating should always address the material impact of the rated entity on the environment and society in general. ESG rating providers should review ESG ratings methodologies on an on-going basis and at least annually, including to take into account European and International developments affecting the E, S and/or G factors.

Amendment 130 #

Proposal for a regulation
Recital 20

(20) To ensure the quality and reliability of ESG ratings, ESG rating providers should use rating methodologies that are rigorous, systematic, objective, and continuous ~~and subject to validation~~. ESG rating providers should review ESG ratings methodologies on an on-going basis and at least annually, and should regularly evaluate their methodologies against the outputs which they have been used to produce.

Amendment 131 #

Proposal for a regulation
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 132 #

Proposal for a regulation
Recital 20

(20) To ensure the quality and reliability of ESG ratings, ESG rating providers should use rating methodologies that are rigorous, systematic, ~~objective~~independent, continuous and subject to ~~valid~~justification. ESG rating providers should review ESG ratings methodologies on an on-going basis and at least annually.

Amendment 133 #

Billy KELLEHER, Gilles BOYER, Pascal CANFIN, Stéphanie YON-COURTIN

Proposal for a regulation
Recital 20 a (new)

(20 a) Taking into account the Union objectives and international standards for each factor is a prerequisite to ensure a sufficient level of quality of ESG ratings. As such, for the “E” factor, ESG ratings providers should ensure that the rated entity’s activities are aligned with the objectives set in the Paris agreement.

Amendment 134 #

Pascal DURAND, René REPASI, Pedro SILVA PEREIRA, Paul TANG

Proposal for a regulation
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, they should, to the greatest extent possible, take into account all relevant information, in each of the materiality dimensions, on sustainability matters falling within the scope of the rated entity’s activities. As a result, the rating products should explicitly ~~disclose whic~~address both dimensions of the double materiality, th~~e rating addresses, whether it is bo~~at is, both the 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~~. On the one hand, an impact dimension pertains to the undertaking’s material actual or potential, positive or negative impacts on people or the environment over the short-, medium- and long-term. Impacts include those connected with the undertaking’s own operations and upstream and downstream value chain, including through its products and services, as well as through its business relationships, as defined in the delegated act supplementing Directive 2013/34/EU. On the other hand, a financial dimension should be considered if it triggers or could reasonably be expected to trigger material financial effects ofn the~~m. They~~ undertaking. This is the case when a sustainability matter generates or may generate risks or opportunities that have a material influence, or could reasonably be expected to have a material influence, on the undertaking's development, financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium- or long-term. ESG rating providers 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.

Amendment 135 #

Proposal for a regulation
Recital 21

Amendment 136 #

Proposal for a regulation
Recital 21

Amendment 137 #

Proposal for a regulation
Recital 21

Amendment 138 #

Billy KELLEHER, Gilles BOYER, Pascal CANFIN, Stéphanie YON-COURTIN

Proposal for a regulation
Recital 21

Amendment 139 #

Proposal for a regulation
Recital 21 a (new)

(21 a) This Regulation should not interfere with the ESG rating methodologies or content. Diversity in the methodologies of ESG ratings providers ensures that the broad requirements of users can be met and promotes competition in the market.

Amendment 140 #

Proposal for a regulation
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 reinsurance 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 141 #

Proposal for a regulation
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 reinsurance~~consulting 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 142 #

Proposal for a regulation
Recital 22

Amendment 143 #

Proposal for a regulation
Recital 22 a (new)

(22 a) The Commission should review the Credit Rating Agencies Regulation to include the obligation to rate sustainability aspects in both, public and private sectors.

Amendment 144 #

Proposal for a regulation
Recital 22 b (new)

(22 b) The ratings need to be based on harmonised life cycle assessment methodologies and science. These methodologies should be disclosed transparently. The negative impacts of the ESG risks should be clearly rated, in case of prevailing risk or significant harm, according to the do no significant harm principle.

Amendment 145 #

Proposal for a regulation
Recital 22 c (new)

(22 c) ESG ratings should work in a social and climate-just way within the planetary boundaries.

Amendment 146 #

Proposal for a regulation
Article 1 – paragraph 1

This Regulation introduces a common regulatory approach to enhance the integrity, comparability, transparency, responsibility, good governance, and independence of ESG rating activities, contributing to the ~~transparenc~~reliability and quality of ESG ratings. It aims to contribute to the smooth functioning of the internal market, while achieving a high level of consumer and investor protection and preventing greenwashing or other types of misinformation, including social-washing, by introducing transparency and minimum requirements related to ESG ratings and rules on the organisation and conduct of ESG rating providers.

Amendment 147 #

Proposal for a regulation
Article 1 – paragraph 1

This Regulation introduces a common regulatory approach to enhance the integrity, transparency, responsibility, good governance, and independence of ESG rating activities, contributing to the consistency, transparency and ~~qua~~comparability of ESG ratings. It aims to contribute to the smooth functioning of the internal market, while achieving a high level of consumer and investor protection and preventing greenwashing or other types of misinformation, including social- washing, by introducing transparency requirements related to ESG ratings and rules on the organisation and conduct of ESG rating providers.

Amendment 148 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 1 a (new)

Article1a Use of an ESG rating A regulated financial undertaking may use an ESG rating or a combination of ESG ratings in the Union if the ESG rating is provided by an ESG rating provider included in the register referred to in Article 13 or if it has developed the ESG rating exclusively for in-house use.

Amendment 149 #

Proposal for a regulation
Article 2 – paragraph 1

1. This Regulation applies to ESG ratings ~~issued by ESG rating~~and ESG data products issued by ESG ratings and ESG data products providers operating in the Union that are disclosed publicly or that are distributed to regulated financial undertakings in the Union, undertakings that fall under the scope of Directive 2013/34/EU of the European Parliament and of the Council, or Union or Member States public authorities.

Amendment 150 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 1

1. This Regulation applies to ESG ratings issued by ESG rating providers operating in the Union and to ESG DATA estimates that are disclosed publicly or that are distributed to regulated financial undertakings in the Union, undertakings that fall under the scope of Directive 2013/34/EU of the European Parliament and of the Council, or Union or Member States public authorities.

Amendment 151 #

Proposal for a regulation
Article 2 – paragraph 2 – point a

(a) private ESG ratings and ESG data products which are not intended for public disclosure or for distribution;

Amendment 152 #

Erik POULSEN

Proposal for a regulation
Article 2 – paragraph 2 – point b

(b) ESG ratings produced by regulated financial undertakings in the Union that ~~are~~may be, inter alia: (i) used for internal purposes; or ~~for providing in-house financial services and products;~~ (ii) provided externally as, or as part of, a product or service that is regulated by existing EU regulations or third country equivalents, such as Regulation (EU) 2019/2088 (SFDR), Regulation (EU) No 596/2014 (MAR), Directive 2014/65/EU (MiFID II), Regulation (EU) 2019/2089 (Low Carbon Benchmark Regulation), Directive 2009/65/EC (UCITS) and Directive 2011/61/EU (AIFMD); or (iii) used for providing in-house financial services and products; or (iv) provided to intra-group entities included in the accounting consolidated group or to the assets under management of the group;

Amendment 153 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 2 – point b

(b) ESG ratings produced by regulated financial undertakings in the Union that ~~are~~may be, inter alia: i) used for internal purposes; or ~~for providing in-house financial services and products;~~ ii) provided externally as, or as part of, a product or service that is regulated by existing EU regulations or third country equivalents, such as Regulation (EU) 2019/2088 (SFDR), Regulation (EU) 596/2014 (MAR), Directive 2014/65/EU (MiFID II) and / or Regulation 2019/2089 (Low Carbon Benchmark Regulation); or iii) used for providing in-house financial services and products; or iv) provided to intra-group entities included in the accounting consolidated group or to the assets under management of the group;

Amendment 154 #

Proposal for a regulation
Article 2 – paragraph 2 – point b

(b) ESG ratings and ESG data products produced by regulated financial undertakings in the Union that are: i) used for internal purposes, or ~~for providing in-house financial services and~~provided to other entities that are part of the same consolidated group; or ii) provided or disclosed as an element in conjunction with, and limited to, a regulated financial service or product; or iii) required by or derived from the regulations applicable to EU regulated financial undertakings, services or products;

Amendment 155 #

(b) ESG ratings produced by regulated financial undertakings in the Union that are used for internal purposes or for providing in-house financial services and products and that are not used in external marketing of products or advice issued by the financial undertakings;

Amendment 156 #

Proposal for a regulation
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 157 #

Proposal for a regulation
Article 2 – paragraph 2 – point b

(b) ESG ratings produced by regulated financial undertakings in the Union that are used exclusively for internal purposes or for providing in-house or intra-group financial services and products; as long as those ratings are not disclosed to third parties beyond the group;

Amendment 158 #

Proposal for a regulation
Article 2 – paragraph 2 – point b

(b) ESG ratings produced by regulated financial undertakings in the Union that are used exclusively for internal purposes or for providing in-house financial services and products;

Amendment 159 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 2 – point b a (new)

(ba) ESG scores or factors that are produced as part of and incorportated into the public methodologies for credit ratings and are not marketed independently;

Amendment 160 #

Proposal for a regulation
Article 2 – paragraph 2 – point c

~~(c) the provision of raw ESG data that do not contain an element of rating or scoring, and is not subject to any modelling or analysis resulting in the development of an ESG rating;~~deleted

Amendment 161 #

Proposal for a regulation
Article 2 – paragraph 2 – point c

(c) the provision of raw ESG data that do not contain and element of rating or scoring, or estimate and are gathered by ESG data products providers from companies’ public disclosures or from other publicly available information and is not subject to any modelling or analysis resulting in the development of an ESG rating or ESG estimates;

Amendment 162 #

Proposal for a regulation
Article 2 – paragraph 2 – point c

(c) the provision of ~~raw~~ ESG data that do not contain an element of rating or scoring, and is not subject to any modelling or analysis ~~resulting in the development of an ESG rating~~;

Amendment 163 #

Proposal for a regulation
Article 2 – paragraph 2 – point c a (new)

(ca) ESG ratings which are produced and disclosed within the scope of existing EU regulations;

Amendment 164 #

Proposal for a regulation
Article 2 – paragraph 2 – point d

(d) credit ratings issued pursuant to Regulation (EC) No 1060/2009 of the European Parliament and of the Council30 and any ESG-related scores that are used as components of credit ratings as part of the public methodology for credit ratings; _________________ 30 Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, p. 1).

Amendment 165 #

Proposal for a regulation
Article 2 – paragraph 2 – point d

(d) credit ratings issued pursuant to Regulation (EC) No 1060/2009 of the European Parliament and of the Council30 and any assessments of ESG factors that are created in relation to the analysis of, or as an output of, credit ratings; _________________ 30 Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, p. 1).

Amendment 166 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 2 – point e

(e) ~~products or services that incorporate~~“recommendations” containing an element of an ESG rating within the meaning of Article 1(3) Commission Directive 2003/125/EC;

Amendment 167 #

Proposal for a regulation
Article 2 – paragraph 2 – point e

(e) products or services that incorporate an element of an ESG rating or of an ESG data product;

Amendment 168 #

Proposal for a regulation
Article 2 – paragraph 2 – point e a (new)

(ea) ESG ratings produced internally and forming part of “investment research” products as defined in Article 24(1) of Directive 2006/73/EC and other forms of general ESG-related recommendations, relating to transactions in financial instruments or to financial obligations (such as MAR and MiFID II - delegated acts on investment recommendation and research);

Amendment 169 #

Proposal for a regulation
Article 2 – paragraph 2 – point e b (new)

(eb) opinions about the sustainability profile of a financial instrument or a financial obligation;

Amendment 170 #

Proposal for a regulation
Article 2 – paragraph 2 – point e c (new)

(ec) opinions about the sustainability profile of a financial instrument or a financial obligation; (h) credit ratings issued pursuant to Regulation (EC) No 1060/2009 of the European Parliament and of the Council;

Amendment 171 #

Proposal for a regulation
Article 2 – paragraph 2 – point e d (new)

(ed) ESG rating elements that are used or provided or disclosed as complementary or substantial to financial products or services that incorporate an element of an ESG rating;

Amendment 172 #

Proposal for a regulation
Article 2 – paragraph 2 – point f

(f) second-party opinions ~~on sustainability bonds~~;

Amendment 173 #

Proposal for a regulation
Article 2 – paragraph 2 – point f

(f) second-party opinions on ~~sustainability bond~~all types of green, social, sustainability and sustainability-linked bonds and loans;

Amendment 174 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 2 – point f

(f) second-party opinions on sustainab~~ility bond~~le debt instruments, including but not limited to sustainability bonds, loans and other types of debt instruments, as well as financing frameworks that govern the use of such instruments;

Amendment 175 #

Proposal for a regulation
Article 2 – paragraph 2 – point g

(g) ESG ratings and ESG data products produced by Union or Member States’ public authorities;

Amendment 176 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 2 – point h

(h) ESG ratings from an authorised ESG rating provider that are made available to users by a third party or an affiliate of the authorised ESG rating provider within the same group structure;

Amendment 177 #

Proposal for a regulation
Article 2 – paragraph 2 – point h

(h) ESG ratings and ESG data products from an authorised ESG ratings and ESG data products provider that are made available to users by a third party;

Amendment 178 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 2 – point i – introductory part

(i) ESG ratings and ESG data products produced by central banks that fulfil all of the following conditions:

Amendment 179 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – introductory part

(i) ESG ratings produced by ~~central banks that fulfil all of the following conditions:~~members of the European System of Central Banks (ESCB);

Amendment 180 #

Proposal for a regulation
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 181 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point a

~~(a) they are not paid for by the rated entity;~~deleted

Amendment 182 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point b

~~(b) they are not disclosed to the public;~~deleted

Amendment 183 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point b

(b) they are not ~~disclosed to the public~~produced or disseminated for commercial purposes;

Amendment 184 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point c

~~(c) they are provided in accordance with the principles, standards and procedures which ensure the adequacy, integrity and independence of rating activities, as provided for by this Regulation, an~~deleted

Amendment 185 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point c

Amendment 186 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point d

~~(d) they do not relate to financial instruments issued by the respective central banks’ Member States.~~deleted

Amendment 187 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point d

~~(d) they do not relate to financial instruments issued by the respective central banks’ Member States.~~deleted

Amendment 188 #

Proposal for a regulation
Article 2 – paragraph 2 – point i – point d a (new)

(d a) the transparency of methodology requirements pursuant to Article 13 of Regulation 2016/1011;

Amendment 189 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 2 – paragraph 2 – point i a (new)

(ia) non-profit civil society organisations or academics or journalists putting together scoreboards or rankings for non-commercial purposes, which represent a non-significant part of their overall activities.

Amendment 190 #

Proposal for a regulation
Article 2 – paragraph 2 – point i a (new)

(i a) investment reasearch products, such as equity research reports, which may incorporate ESG considerations, but which are different to the ratings of only ESG matters.

Amendment 191 #

Proposal for a regulation
Article 2 – paragraph 2 – point i a (new)

(i a) the mandatory disclosures pursuant to Articles 6, 8 and 9 of Regulation (EU) 2019/2088;

Amendment 192 #

Proposal for a regulation
Article 2 – paragraph 2 – point i b (new)

(i b) the disclosures pursuant to Articles 5, 6 and 8 of Regulation (EU) 2020/852;

Amendment 193 #

Proposal for a regulation
Article 2 – paragraph 2 – point i c (new)

(i c) the transparency of methodology requirements to Article 13 and Annex III of Regulation 2019/2089;

Amendment 194 #

Proposal for a regulation
Article 2 – paragraph 2 – point i d (new)

(i d) the transparency of methodology requirements to Article 13 of Regulation 2019/2175;

Amendment 195 #

Proposal for a regulation
Article 2 – paragraph 2 – point i e (new)

(ie) the transparency of methodology requirements to Article 13 of Regulation 2021/168.

Amendment 196 #

Proposal for a regulation
Article 2 – paragraph 2 a (new)

2 a. ESMA shall develop draft regulatory technical standards to specify further what constitutes a use exclusively for internal purposes or for providing in- house financial services and products in accordance with point (b) of paragraph 2. ESMA shall submit those draft regulatory technical standards to the Commission by [12 months after the entry into force of this Regulation]. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) 1095/2010.

Amendment 197 #

Proposal for a regulation
Article 3 – paragraph 1 – point 1

(1) ‘ESG rating’ means a product marketed as providing an opinion, a score or a combination of both, or the analysis or modelling of data 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~~or 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 198 #

Proposal for a regulation
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 199 #

Proposal for a regulation
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 ESG profile or characteristics or exposure to ESG risks or the impact on people, society and the environment, that are based on an established and transparent 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 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
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 201 #

Proposal for a regulation
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 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 ~~provid~~marketed to third parties, irrespective of whether such ESG rating is explicitly labelled as ‘rating’ or ‘ESG score’;

Amendment 202 #

Proposal for a regulation
Article 3 – paragraph 1 – point 1 a (new)

(1 a) ‘ESG data estimates’ means raw data relative to ESG profile or characteristics of an undertaking that do not result from the gathering of ESG data from companies’ public disclosures or from other publicly available information but rather derive from estimates or approximations by the ESG data providers - where pure raw data are not available;

Amendment 203 #

Proposal for a regulation
Article 3 – paragraph 1 – point 2

(2) ‘opinion’ means an 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 204 #

Proposal for a regulation
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 205 #

Proposal for a regulation
Article 3 – paragraph 1 – point 3

(3) ‘score’ means a 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 206 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
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 207 #

Proposal for a regulation
Article 3 – paragraph 1 – point 3 a (new)

(3 a) ‘ESG data product’ means a product marketed as providing either a specific E, S, or G focus or a holistic or combined ESG focus on an entity, financial instrument, product or company’s ESG profile or characteristics or exposure to ESG, climatic or environmental risks or impact on society and the environment, whether or not they are explicitly labelled as “ESG data products”. ESG data products include: (i) ‘ESG raw data’ gathered from companies' publicly available reportings whenever possible or other sources otherwise, formatted and re-disseminated, and (ii) ‘ESG processed data’ that have been determined or estimated according to a methodology applied by the provider, including, but not limited to, estimates, sectoral data and proxies of missing raw data, and that do not qualify as ESG ratings;

Amendment 208 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 3 – paragraph 1 – point 4

(4) ‘ESG ratings providers’ means a legal person whose occupation includes the ~~offering and distribution~~marketing of ESG ratings ~~or scores~~ on a professional basis, and for a charge;

Amendment 209 #

Proposal for a regulation
Article 3 – paragraph 1 – point 4

(4) ‘ESG rating providers’ means a legal person whose occupation includes the ~~offering and distribution~~issuing of ESG ratings ~~or scores~~ on a professional basis;

Amendment 210 #

Proposal for a regulation
Article 3 – paragraph 1 – point 4

(4) ‘ESG rating providers’ means a legal person whose occupation includes the ~~offering and distribution~~issuance of ESG ratings or scores on a professional basis;

Amendment 211 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 3 – paragraph 1 – point 4

(4) ‘ESG rating providers’ means a legal person whose occupation includes the ~~offering and distribution~~issuance of ESG ratings or scores on a professional basis;

Amendment 212 #

Proposal for a regulation
Article 3 – paragraph 1 – point 4 a (new)

(4a) ‘ESG data products provider’ means a legal person whose occupation includes the marketing of ESG data products on a professional basis, and for a charge;

Amendment 213 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 3 – paragraph 1 – point 4 b (new)

(4 b) ‘ESG ratings and ESG data products provider’ cover an ESG rating provider, or an ESG data product provider, or a provider marketing both ESG ratings and ESG data products on a professional basis, and for a charge;

Amendment 214 #

Proposal for a regulation
Article 3 – paragraph 1 – point 7

(7) ‘rated entity’ means a legal person, a financial instrument, a financial product or a public authority or a body governed by public law which is explicitly ~~or implicitly~~ rated in the ESG rating ~~or score~~, irrespective of whether such rating has been requested for and irrespective of whether the legal person has provided information for that ESG rating or score;

Amendment 215 #

Proposal for a regulation
Article 3 – paragraph 1 – point 8

(8) ‘user’ means a natural or legal person, including a public authority or a body governed by public law, to which an ESG rating is provided, on the basis of a contract with an ESG rating provider;

Amendment 216 #

Proposal for a regulation
Article 3 – paragraph 1 – point 9 a (new)

(9a) ‘management body’ means the body or bodies of an ESG rating provider which are empowered to define the ESG rating provider’s strategy and objectives, and responsible for overseeing and monitoring the ESG rating provider’s activities.

Amendment 217 #

Proposal for a regulation
Article 3 – paragraph 1 – point 10

(10) ‘senior management’ means the person or persons who effectively direct the business of the ESG rating provider and the member or members of the ESG rating provider’s administrative or supervisory board.deleted

Amendment 218 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

(10) ‘senior management’ means the person or persons who effectively ~~direct~~run the business of the ESG rating provider and the member or members of the ESG rating provider’s administrative or supervisory board.

Amendment 219 #

Proposal for a regulation
Article 3 – paragraph 1 – point 11

(11) ‘group of ESG rating and ESG data products providers' means a group of undertakings established in the Union consisting of a parent undertaking and its subsidiaries within the meaning of Article 2 of Directive 2013/34/EU, and undertakings linked to each other by a relationship and whose occupation includes the provision of ESG ratings and/or ESG data products.

Amendment 220 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Title II

Provision of ESG ratings and ESG data products in the Union

Amendment 221 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 4 – title

Requirements to provide ESG ratings and ESG data products in the Union

Amendment 222 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 4 – paragraph 1 – introductory part

Any ~~legal person~~ESG rating or ESG data products provider who wishes to provide ESG ratings and/or ESG data products in the Union shall be subject to either of the following:

Amendment 223 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 4 – paragraph 1 – point d

~~(d) a recognition as referred to in Article 11;~~deleted

Amendment 224 #

Proposal for a regulation
Title II – Chapter 1 – title

1 Authorisation to provide ESG ratings and ESG data products in the Union

Amendment 225 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 5 – title

Application for an authorisation to provide an ESG ratings and data products

Amendment 226 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 5 – paragraph 1

1. ~~Legal person~~ESG ratings and ESG data products providers established in the Union that wish to provide ESG ratings in the Union shall apply for authorisation to ESMA. (Amendment applies throughout article 5: ESG ratings and ESG data products providers.)

Amendment 227 #

Proposal for a regulation
Article 5 – paragraph 3 – subparagraph 2

ESMA shall submit those draft regulatory technical standards to the Commission by ~~XX XXXX XXXX~~[9 months after the entry into force of this Regulation].

Amendment 228 #

Proposal for a regulation
Article 5 – paragraph 3 – subparagraph 3

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph, including the ones related to material changes provisioned in paragraph 5a, in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Amendment 229 #

Proposal for a regulation
Article 5 – paragraph 5

5. ESG rating providers shall notify ESMA of any material changes to the conditions for initial authorisation, ~~including any opening or closing of a branch within the Union,~~ without undue delay.

Amendment 230 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 5 – paragraph 5 a (new)

5a. ESMA shall develop draft regulatory technical standards to specify what constitutes a material change as referred in paragraph 5.

Amendment 231 #

Proposal for a regulation
Article 6 – title

Examination of the application for authorisation of ESG rating ~~providers by ESMA~~s and ESG data products providers by ESMA (Amendment applies throughout article 6: ESG ratings and ESG data products providers.)

Amendment 232 #

1. Within 320 working days of receipt of the application referred to in Article 5(2), ESMA shall assess whether the application is complete. Where the application is not complete, ESMA shall set a deadline by which the applicant is to provide additional information.

Amendment 233 #

Proposal for a regulation
Article 6 – paragraph 3

3. Within ~~120~~45 working days of the notification referred to in paragraph 2, ESMA shall adopt a fully reasoned decision to authorise or refuse authorisation.

Amendment 234 #

Proposal for a regulation
Article 6 – paragraph 3

3. Within 1290 working days of the notification referred to in paragraph 2, ESMA shall adopt a fully reasoned decision to authorise or refuse authorisation.

Amendment 235 #

Proposal for a regulation
Article 6 – paragraph 4 – introductory part

4. ESMA may extend the period referred to in the paragraph 3 ~~to 140~~by 15 working days in particular where the applicant:

Amendment 236 #

Proposal for a regulation
Article 6 – paragraph 4 – introductory part

4. ESMA may extend the period referred to in the paragraph 3 to 1420 working days in particular where the applicant:

Amendment 237 #

Proposal for a regulation
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 238 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 6 – paragraph 5 a (new)

5 a. If no decision is adopted by ESMA within the period referred to in paragraph 3 or4, as applicable, the applicant shall not be considered authorised to provide ESG ratings in the Union. Authorities´ adequate expertise to analyse the sustainability risks should be granted.

Amendment 239 #

Proposal for a regulation
Article 7 – title

Decision to grant or to refuse the authorisation to provide ESG ratings and ESG data products and notification of that decision (Amendment applies throughout article 7: ESG ratings and ESG data products providers.)

Amendment 240 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

1. ESMA shall withdraw or suspend the authorisation of an ESG ratings and ESG data products provider(s) in any of the following cases: (Amendment applies throughout article 8: ESG ratings and ESG data products providers.)

Amendment 241 #

Billy KELLEHER, Gilles BOYER, Stéphanie YON-COURTIN

Proposal for a regulation
Article 8 – paragraph 1 – point a

(a) the ESG rating provider has expressly renounced the authorisation or has provided no ESG ratings for ~~nin~~twelve months preceding that withdrawal or suspension;

Amendment 242 #

Proposal for a regulation
Article 8 – paragraph 2 a (new)

2a. In the event of a withdrawal or suspension on the basis of the cases listed in points (b)-(d) of paragraph 1, ESMA shall publish the decision on its website.

Amendment 243 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Title II – Chapter 2 – title

2 Provision of ESG ratings and ESG data products in the Union by third country ESG ratings and ESG data products providers

Amendment 244 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 9 – paragraph 1 – introductory part

1. A third country ESG ratings and ESG data products providers(s) that wishes to provide ESG ratings and ESG data products in the Union shall only be able to do so where it is included in the register referred to in Article 13 and provided that all of the following conditions have been complied with: (Amendment applies throughout article 9: ESG ratings and ESG data products providers.)

Amendment 245 #

Proposal for a regulation
Article 9 – paragraph 1 – point a

(a) the third country ESG rating provider is a legal person, is authorised ~~or registered~~ as an ESG rating provider in the third country concerned, and is subject to supervision by that third country;

Amendment 246 #

Proposal for a regulation
Article 9 – paragraph 1 – point d a (new)

(da) 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 247 #

Proposal for a regulation
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 248 #

(db) the third country ESG ratings provider has been authorised by ESMA in accordance with Article 5.

Amendment 249 #

Proposal for a regulation
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 250 #

Pascal DURAND, René REPASI, Pedro SILVA PEREIRA, Paul TANG

Proposal for a regulation
Article 9 – paragraph 2 – subparagraph 1 – introductory part

The Commission ~~may~~shall, where applicable, adopt an implementing decision stating that the legal framework and supervisory practice of a third country ensures that:

Amendment 251 #

Proposal for a regulation
Article 9 – paragraph 2 – subparagraph 1 – point b

(b) compliance with the binding requirements referred to in point (a) is subject to effective, regular and equivalent supervision and enforcement on an on-going basis in that third country.

Amendment 252 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 9 – paragraph 2 – subparagraph 2

Amendment 253 #

Proposal for a regulation
Article 9 – paragraph 2 – subparagraph 2

For the purposes of point (a), ~~the Commission shall~~by XXXX, ESMA shall adopt regulatory technical standards to further specify the implementation of the conditions listed in paragraph 2a), including takeing into account whether the legal framework and supervisory practice of a third country ensures compliance with the IOSCO recommendations for ESG Ratings and ESG data products published in November 2021.

Amendment 254 #

Proposal for a regulation
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 compliance with the IOSCO recommendations for ESG Ratings published in November 2021 as well as with all Europan Union legislation relating to sustainability disclosure, including Regulation (EU) 2019/2088 of the European Parliament and of the Council, Regulation (EU) 2020/852 of the European Parliament and of the Council and Directive (EU) 2022/2464 of the European Parliament and of the Council.

Amendment 255 #

Proposal for a regulation
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 256 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 9 – paragraph 4 – point a

(a) the mechanism for exchanging information on a regular and ad-hoc basis between ESMA and the competent authorities of third countries concerned, including access to all relevant information requested by ESMA regarding the ESG rating provider authorised or registered in that third country;

Amendment 257 #

Proposal for a regulation
Article 10 – title

Endorsement of ESG ratings and ESG data products provided by a third country ESG rating ~~provider~~s and ESG data products provider(s) (Amendment applies throughout article 10: ESG ratings and ESG data products providers.)

Amendment 258 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 1 – introductory part

An ESG rating provider located in the Union and authorised in accordance with Article 7, or any other regulated financial undertaking in the Union with a clear and well-defined role within the control or accountability framework of a third country ESG rating provider, may endorse ESG ratings provided by a third country ESG rating provider belonging to the same group, provided that all of the following conditions have been met:

Amendment 259 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 1 – point a

(a) the endorsing ESG rating provider ~~located in the Union has applied~~or other regulated financial undertaking in the Union has submitted a request to ESMA for authorisation of such endorsement;

Amendment 260 #

(b) the endorsing ESG rating provider ~~located~~or other regulated financial undertaking in the Union has verified and is able to demonstrate on an on- going basis to ESMA that the provision of the ESG rating to be endorsed fulfils requirements which are at least as stringent as the requirements of this Regulation;

Amendment 261 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 1 – point c

(c) the endorsing ESG rating provider ~~located~~or other regulated financial undertaking in the Union has the necessary expertise to monitor the provision of ESG ratings by the third country ESG rating provider effectively, and to manage any associated risks;

Amendment 262 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 1 – point e

(e) the endorsing ESG rating provider ~~located in the Union provides ESMA at~~ or other regulated financial undertaking in the Union that submits a request ~~with all the information necessary to enable ESMA to supervise the compliance by the third country ESG rating provider with this Regulation on an ongoing basis~~for endorsement shall provide all information necessary to satisfy ESMA that, at the time of application, all the conditions referred to in this paragraph 1 are fulfilled;

Amendment 263 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 1 – point e

(e) the ESG rating provider located in the Union provides ESMA at its request with all the information necessary to enable ESMA to supervise the compliance by the third country ESG rating provider with this Regulation on an ongoing basis, in accordance with Article 30;

Amendment 264 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 2

For the purposes of point (b) ~~of the first subparagraph, ESMA may consider that~~, by XXXX, ESMA shall adopt regulatory technical standards to further specify the implementation of the conditions listed in paragraph 1, including taking into account whether compliance of the provision of the ESG rating to be endorsed with the IOSCO recommendations for ESG ratings and data products is equivalent to compliance with the requirements of this Regulation.

Amendment 265 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 2

For the purposes of point (b) of the first subparagraph, ESMA may consider that compliance of the provision of the ESG rating to be endorsed with the IOSCO recommendations for ESG ratings as well as with all Europan Union legislation relating to sustainability disclosure, including Regulation (EU) 2019/2088 of the European Parliament and of the Council, Regulation (EU) 2020/852 of the European Parliament and of the Council and Directive (EU) 2022/2464 of the European Parliament and of the Council is equivalent to compliance with the requirements of this Regulation.

Amendment 266 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 2

For the purposes of point (b) of the first subparagraph, ESMA ~~may consider~~shall assess 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~~ s with the requirements of this Regulation.

Amendment 267 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
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 268 #

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 2 a (new)

The endorsement of ESG ratings or ESG data products cannot represent the main activity of an ESG rating provider authorised in accordance with Article 7.

Amendment 269 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 10 – paragraph 1 – subparagraph 2 b (new)

For the purposes of point (d) of the first subparagraph, ESMA shall develop regulatory technical standards to specify the objective reasons to be accepted.

Amendment 270 #

Proposal for a regulation
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 eit~~assess 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 t~~o authorise the endorsement or to refuse it~~he 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 271 #

Proposal for a regulation
Article 10 – paragraph 3

3. Within 30 working days of receipt of the application for endorsement referred to in paragraph 1, ESMA shall assess whether the application is complete. When the application is not complete, ESMA shall notify the ESG rating provider and shall set a deadline by which the applicant must complete its application. ESMA shall refuse the authorisation where the ESG rating provider fails to complete its application within the deadline. Within 90 working days of receipt of the application for endorsement referred to in paragraph 1, ESMA shall examine the application and decide either to authorise the endorsement or to refuse it. ESMA shall publicly notify the decision to endorse provided by a third country ESG rating provider.

Amendment 272 #

Proposal for a regulation
Article 10 – paragraph 3

3. ~~Within 90 working days of receipt of~~ESMA shall examine the application for endorsement referred to in paragraph 1~~, ESMA shall examine the application and decide~~ and decide within 90 days of receipt either to a~~uthoris~~pprove the endorsement or to refuse it. ESMA shall publi~~cly notify the decision to endorse provided by a third country ESG rating provider~~sh its decision.

Amendment 273 #

Proposal for a regulation
Article 10 – paragraph 4

4. An endorsed ESG rating shall be considered to be an ESG rating provided by the endorsing ESG rating provider~~. The endorsing provider~~ or other regulated financial undertaking in the Union. The endorsing ESG rating provider or other regulated financial undertaking in the Union shall not use the endorsement to avoid or circumvent the requirements of this Regulation.

Amendment 274 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 10 – paragraph 5

5. An ESG rating provider or other regulated financial undertaking in the Union that has endorsed an ESG rating provided by a third country ESG rating provider shall remain fully responsible for such an ESG rating and for compliance with the obligations under this Regulation.

Amendment 275 #

Proposal for a regulation
Article 10 – paragraph 6

6. Where ESMA has well-founded reasons to consider that the conditions laid down in ~~paragraph 1~~this Article are no longer fulfilled, it shall have the power to require the endorsing ESG ratings and ESG data products provider(s) to cease the endorsement. This is without prejudice to the sanctions applicable to the authorised ESG rating and ESG data products in accordance with Articles 33 to 35.

Amendment 276 #

Proposal for a regulation
Article 10 – paragraph 6

6. Where ESMA has well-founded reasons to consider that the conditions laid down in paragraph 1 are no longer fulfilled, it shall have the power to require the endorsing ESG rating provider or other regulated financial undertaking in the Union to cease the endorsement.

Amendment 277 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 11

~~[...]~~deleted

Amendment 278 #

Proposal for a regulation
Article 11 – title

Recognition of third country ESG rating ~~providers~~s and ESG data products providers (Amendment applies throughout article 11: ESG ratings and ESG data products providers.)

Amendment 279 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 11 – paragraph 1

1. Until the Commission has adopted an equivalence decision as referred to in Article 9 or, where adopted, in the event that the equivalence decision is repealed, third country ESG rating ~~providers with an~~s and ESG data products provider(s) belonging to a group in accordance with Article 2(11) of Directive 2013/34/EU with a consolidated annual net turnover on their ESG rating activities below EUR 12 million for three consecutive years may provide ESG ratings and ESG data products to regulated financial undertakings in the Union, provided that ESMA has recognised that third country ESG ratings and ESG data products provider(s) in accordance with this ~~paragraphs XX and YY~~Article.

Amendment 280 #

Proposal for a regulation
Article 11 – paragraph 1

1. Until the Commission has adopted an equivalence decision as referred to in Article 9 or, where adopted, in the event that the equivalence decision is repealed, third country ESG rating providers ~~with an annual net turnover on their ESG rating activities below EUR 12 million for three consecutive years~~ may provide ESG ratings to regulated financial undertakings in the Union, provided that ESMA has recognised that third country ESG rating provider in accordance with this ~~paragraphs XX and YY~~Article.

Amendment 281 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 11 – paragraph 1

1. Until the Commission has adopted an equivalence decision as referred to in Article 9 or, where adopted, in the event that the equivalence decision is repealed, third country ESG rating providers with an annual net turnover on their ESG rating activities in the Union below EUR 12 million for three consecutive years may provide ESG ratings to regulated financial undertakings in the Union, provided that ESMA has recognised that third country ESG rating provider in accordance with this paragraphs XX and YY.

Amendment 282 #

Pascal DURAND, René REPASI, Pedro SILVA PEREIRA, Paul TANG

Proposal for a regulation
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 provided that such application is equivalent to compliance with the requirements established in this Regulation and, for the ESG rating of the undertakings in the scope of Directive 2013/34/EU of the European Parliament and of the Council, that it takes into account information of the rated entity’s activities on sustainability matters, as defined in Article 2, subparagraph b, point 17 of Directive 2013/34/EU of the European Parliament and of the Council, for each of the materiality dimensions.

Amendment 283 #

Proposal for a regulation
Article 11 – paragraph 2 – subparagraph 1

Third country ESG ratings and ESG data products providers(s) 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~~By XXX, ESMA shall adopt regulatory technical standards to further specify the implementation of thate condition bys listed in paragraph 2, including whether ESG rating providers applying the IOSCO recommendations on ESG ratings ~~provided that such application~~and ESG data products is equivalent to compliance with the requirements established in this Rregulation.

Amendment 284 #

Proposal for a regulation
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 prov~~When ESMA assesses whether third country ESG providers comply with the requirements of this Regulation, it shall considedr th~~at such~~e application ~~is equivalent to compliance with the requirements established in this Regulation~~of the IOSCO recommendations as the minimum standard.

Amendment 285 #

Proposal for a regulation
Article 12 – paragraph 1

1. Any cooperation arrangement as referred to in Article 9(4)~~, Article 10(1), point (f)~~ and Article 1~~1(5~~0(1), point (~~b),~~f) shall be subject to guarantees of professional secrecy which are at least equivalent to those set out in Article 44. The exchange of information performed under such cooperation arrangements shall be intended for the performance of the tasks of ESMA or the competent authorities.

Amendment 286 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
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 287 #

Proposal for a regulation
Article 13 – title

Register of ESG ratings and ESG data products providers and accessibility of information on the European Single Access Point (ESAP) (Amendment applies throughout article 13: ESG ratings and ESG data products providers.)

Amendment 288 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
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 289 #

Proposal for a regulation
Article 14 – paragraph 1

1. ESG ratings and ESG data products providers shall ensure the independence of their rating activities, including from all political and economic influences or constraints. (Amendment applies throughout article 14: ESG ratings and ESG data products providers.)

Amendment 290 #

Proposal for a regulation
Article 14 – paragraph 4

4. ESG rating providers shall adopt and implement written policies and procedures that ensure that their ESG ratings are based on a thorough analysis of all relevant information ~~available to them~~under the methodology and that can be reasonably expected to be available to them in accordance with their business model.

Amendment 291 #

Proposal for a regulation
Article 14 – paragraph 5

5. ESG rating providers shall adopt and implement internal ~~due diligence~~ policies and procedures that ensure that their business interests do not impair the independence or accuracy of the assessment activities.

Amendment 292 #

Proposal for a regulation
Article 14 – paragraph 7

7. ESG rating providers shall use rating methodologies for the ESG ratings they provide that are rigorous, systematic, and objective and ~~capable of validation and~~ shall apply those rating methodologies continuously. Rating methodologies should be subject to a regular evaluation against the outputs which they have been used to produce.

Amendment 293 #

Proposal for a regulation
Article 14 – paragraph 7

7. ESG rating providers shall use rating methodologies for the ESG ratings they provide that are rigorous, systematic, objective and capable of validation ~~and~~, in accordance with the requirements defined in Title III Chapter 1a of this Regulation. They shall apply those rating methodologies continuously.

Amendment 294 #

Proposal for a regulation
Article 14 – paragraph 7

7. ESG rating providers shall use rating methodologies for the ESG ratings they provide that are rigorous, systematic, ~~objective~~independent and capable of ~~valid~~justification and shall apply those rating methodologies continuously.

Amendment 295 #

Proposal for a regulation
Article 14 – paragraph 7 a (new)

7a. ESG rating providers shall make use of the data disclosed under Regulation (EU) 2019/2088 of the European Parliament and of the Council, Regulation (EU) 2020/852 of the European Parliament and of the Council and Directive (EU) 2022/2464 of the European Parliament and of the Council.

Amendment 296 #

Proposal for a regulation
Article 14 – paragraph 7 a (new)

7a. ESG rating providers, when providing E, S and G ratings, either aggregated or separately, shall, to the greatest extent possible, take into account all material sustainability information, for each of the materiality dimensions.

Amendment 297 #

Proposal for a regulation
Article 14 – paragraph 8

8. ESG rating providers shall review the rating methodologies referred to in paragraph 6 on an on-going basis ~~and at least annually~~.

Amendment 298 #

Proposal for a regulation
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 299 #

Proposal for a regulation
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 300 #

Proposal for a regulation
Article 14 – paragraph 9

9. ESG rating providers shall regularly monitor and evaluate the adequacy and effectiveness of the systems, resources and procedures referred to in paragraph 2 ~~at least annually~~ and take appropriate measures to address any deficiencies.

Amendment 301 #

Proposal for a regulation
Article 14 – paragraph 11

11. ESG rating providers shall adopt, implement, and enforce measures to ensure that their ESG ratings are based on a thorough analysis of all the information that is available to them and that is relevant to their analysis in accordance with their rating methodologies. They shall adopt all necessary measures to ensure that the information they use in assigning ESG ratings is of sufficient quality and from reliable sources. ESG rating providers shall explicitly mention that their ESG ratings are their own opinion .

Amendment 302 #

Proposal for a regulation
Article 14 – paragraph 11

11. ESG rating providers shall adopt, implement, and enforce measures to ensure that their ESG ratings are based on a thorough analysis of all the information that is available to them and that is relevant to their analysis in accordance with their rating methodologies and the requirements laid down in Title III Chapter 1a of this Regulation. They shall adopt all necessary measures to ensure that the information they use in assigning ESG ratings is of sufficient quality and from reliable sources. ESG rating providers shall explicitly mention that their ESG ratings are their own opinion .

Amendment 303 #

Proposal for a regulation
Article 14 – paragraph 12

12. ESG rating providers shall not disclose information related to the rated entities about their intellectual capital, intellectual property, know-how or the results of innovation that would qualify as trade secrets as defined in Article 2, point (1), of Directive (EU) 2016/943 of the European Parliament and of the Council52 . _________________ 52 Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (OJ L 157, 15.6.2016, p. 1).

Amendment 304 #

Proposal for a regulation
Article 14 – paragraph 12

12. ESG rating providers shall not be required to disclose information about their intellectual capital, intellectual property, know-how or the results of innovation that would qualify as trade secrets as defined in Article 2, point (1), of Directive (EU) 2016/943 of the European Parliament and of the Council52 . _________________ 52 Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (OJ L 157, 15.6.2016, p. 1).

Amendment 305 #

Proposal for a regulation
Article 14 – paragraph 13

13. ESG rating providers shall only make changes to their ESG ratings in accordance with their rating methodologies published pursuant to Article 21, unless unexpected and unforeseen events require a deviation from the established methodology in exceptional circumstances. In this case, the ESG rating provider shall make a public announcement and disclose the rationale for the deviation and the nature of the exceptional circumstance.

Amendment 306 #

Proposal for a regulation
Article 14 a (new)

Article14a Organisational requirements, governance and processes 1. An ESG rating provider shall have a management body that has the ultimate responsibility for the compliance of the ESG rating provider with the provisions of this Regulation. The management body shall in particular : (a) assess and adapt the ESG rating provider's strategy in accordance with its ESG rating objectives; (b) ensure that conflicts of interests are properly identified, removed or managed and disclosed; (c) verify that the policies, written procedures and the rating methodology comply with the requirements of this Regulation and are regularly reviewed. 2. An ESG rating provider shall establish and maintain a permanent and independent compliance function for the activities performed under this Regulation. It shall have the necessary resources and expertise and have access to all the information necessary to perform its function. 3. An ESG rating provider shall establish and maintain a permanent oversight function to monitor all aspects of the provision of ESG ratings. The oversight function shall at least: (a) regularly review the ESG rating methodology, including models and key assumptions; (b) verify that the ESG ratings are based on reliable data and of sufficient quality; (c) monitor the implementation of identified remedial actions. 4. The compliance function referred to in paragraph 2 and and the oversight function referred to in paragraph 3 shall have direct access to the management body of the ESG rating provider.

Amendment 307 #

Proposal for a regulation
Article 15

Separation of business and activities 1. ESG rating providers shall not provide any of the following activities: (a) consulting activities to investors or undertakings; (b) the issuance and sale of credit ratings; (c) the development of benchmarks; (d) investment activities; (e) audit activities; (f) banking, insurance, or reinsurance activities. 2. ESG rating providers shall ensure that the provision of other services than those referred to in paragraph 1 does not create risks of conflicts of interest within its ESG rating activities.Article 15 deleted

Amendment 308 #

Proposal for a regulation
Article 15 – paragraph 1 – introductory part

1. ESG rating providers and entities that are part of a group to which an ESG rating provider belongs shall not provide any of the following activities:

Amendment 309 #

Proposal for a regulation
Article 15 – paragraph 1 – introductory part

1. Any person directly or indirectly linked to the ESG rating providers by control shall not provide any of the following activities:

Amendment 310 #

Proposal for a regulation
Article 15 – paragraph 1 – introductory part

1. ESG rating providers shall not provide any ~~of the following~~consulting activity to investors or undertakings nor any audit activit~~ies:~~y.

Amendment 311 #

Proposal for a regulation
Article 15 – paragraph 1 – introductory part

1. ESG rating providers shall not provide ~~any of the following activities~~:

Amendment 312 #

Proposal for a regulation
Article 15 – paragraph 1 – point a

~~(a) consulting activities to investors or undertakings;~~deleted

Amendment 313 #

(a) consulting activities ~~to investors or undertakings~~;

Amendment 314 #

Proposal for a regulation
Article 15 – paragraph 1 – point a

(a) consulting activities to investors or, financial or non-financial undertakings;

Amendment 315 #

Proposal for a regulation
Article 15 – paragraph 1 – point b

~~(b) the issuance and sale of credit ratings;~~deleted

Amendment 316 #

Proposal for a regulation
Article 15 – paragraph 1 – point b

~~(b) the issuance and sale of credit ratings;~~deleted

Amendment 317 #

Proposal for a regulation
Article 15 – paragraph 1 – point b

(b) ~~the issuance and sale~~distribution of credit ratings;

Amendment 318 #

Proposal for a regulation
Article 15 – paragraph 1 – point b

(b) the issuance and ~~sale~~distribution of credit ratings;

Amendment 319 #

Proposal for a regulation
Article 15 – paragraph 1 – point c

~~(c) the development of benchmarks;~~deleted

Amendment 320 #

Proposal for a regulation
Article 15 – paragraph 1 – point c

~~(c) the development of benchmarks;~~deleted

Amendment 321 #

Proposal for a regulation
Article 15 – paragraph 1 – point c

(c) the development of benchmarks by an administrator of benchmarks as defined in Article 3(1), point (3), of Regulation (EU) 2016/1011 of the European Parliament and of the Council;

Amendment 322 #

Proposal for a regulation
Article 15 – paragraph 1 – point d

~~(d) investment activities;~~deleted

Amendment 323 #

Proposal for a regulation
Article 15 – paragraph 1 – point d

~~(d) investment activities;~~deleted

Amendment 324 #

Proposal for a regulation
Article 15 – paragraph 1 – point e

~~(e) audit activities;~~deleted

Amendment 325 #

Proposal for a regulation
Article 15 – paragraph 1 – point e

~~(e) audit activities;~~deleted

Amendment 326 #

Proposal for a regulation
Article 15 – paragraph 1 – point f

~~(f) banking, insurance, or reinsurance activities.~~deleted

Amendment 327 #

Proposal for a regulation
Article 15 – paragraph 1 – point f

~~(f) banking, insurance, or reinsurance activities.~~deleted

Amendment 328 #

Proposal for a regulation
Article 15 – paragraph 1 – point f a (new)

(fa) ESG ratings for entities which belong to the same group as the ESG rating provider.

Amendment 329 #

Proposal for a regulation
Article 15 – paragraph 1 a (new)

1 a. ESG rating providers that provide any of the following activities: (a) the issuance and sale of credit ratings; (b) the development of benchmarks; (c) investment activities; (d) banking, insurance, or reinsurance activities, shall put in place the necessary measures to ensure that each activity is exercised autonomously. In addition, they shall take appropriate measures, including the measures in Articles 23 and 24, to ensure that conflicts of interest do not arise in decision-making, both within the institution itself and between institutions belonging to the same group.

Amendment 330 #

Proposal for a regulation
Article 15 – paragraph 2

2. ESG rating providers shall ensure that the provision of ~~other~~ services ~~than those referred to in paragraph 1 does not create risks of conflicts of interest~~other than ESG ratings does not create unmanageable risks within its ESG rating activities.

Amendment 331 #

Proposal for a regulation
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 332 #

Proposal for a regulation
Article 15 – paragraph 2 a (new)

2a. For the purposes of ensuring sufficient and harmonised safeguards for the provision of other services in accordance with paragraph 2, ESMA shall develop draft implementing technical standards to specify under which conditions ESG rating providers could provide such services. ESMA shall submit those draft implementing technical standards to the Commission by [12 months after the entry into force of this Regulation]. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Amendment 333 #

Proposal for a regulation
Article 16 – title

Rating analysts~~, employees~~ and other persons directly involved in the provision of ESG ratings

Amendment 334 #

Billy KELLEHER, Pascal CANFIN

Proposal for a regulation
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,~~ have the knowledge and experience that is necessary for the performance of the duties and tasks assigned.

Amendment 335 #

Proposal for a regulation
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, have the knowledge and experience that is necessary for the performance of the duties and tasks assigned, in particular a sufficient understanding of potential material financial risk to the rated entity and potential material impact of the rated entity on the environment and society in general.

Amendment 336 #

Proposal for a regulation
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 337 #

Proposal for a regulation
Article 16 – paragraph 3

3. The ~~persons referred to~~ staff of the ESG rating p~~aragraph 1~~rovider shall not buy or sell any financial instrument issued, guaranteed, or otherwise supported by any rated entity other than holdings in diversified collective investment schemes, including managed funds, nor engage in any transaction in such financial instruments.

Amendment 338 #

Proposal for a regulation
Article 16 – paragraph 4 – point c

(c) have had ~~a recent~~, over the last 3 years, an employment, business or other relationship with the rated entity or any entity within the group of the rated entity that may cause or may be generally perceived as causing a conflict of interest.

Amendment 339 #

Proposal for a regulation
Article 16 – paragraph 5 – introductory part

5. ESG rating providers shall ensure that ~~the persons referred to in paragraph 1~~members of its staff:

Amendment 340 #

Proposal for a regulation
Article 16 – paragraph 7

7. Where a rating analyst terminates his or her employment with the ESG rating provider and, within one year, joins a rated entity which he or she has been involved in rating, the ESG rating provider shall review the work of the rating analyst over one year preceding his or her departure.

Amendment 341 #

Proposal for a regulation
Article 16 – paragraph 8

8. Persons as referred to in paragraph 1 as well as persons occupying a senior management position in the ESG rating provider shall not take up a ~~key management~~ position within a rated entity which they have been involved in rating for six months after the provision of such rating.

Amendment 342 #

Proposal for a regulation
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 months~~one year after the provision of such rating.

Amendment 343 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 16 – paragraph 8

Amendment 344 #

Proposal for a regulation
Article 16 a (new)

Article16a Engagement with rated entities pre- publication of the rating report 1. ESG rating providers shall engage with the rated entity to inform it that it will be rated. They shall provide rated entities with a clear and formal notice regarding the rating process including the following: a) a functionning contact point in charge of the rated entity; b) the period during which questionnaires, if any, are being sent out; c) the procedure allowing the rated entity to correct errors; d) the description of the timing and precise terms of the rating process; e) the financial year on which the rating report is based on. 2. ESG rating providers shall ensure that rated entities have a right to respond to the draft rating within 2 weeks before the rating is published. 3. Before publishing the ESG rating, ESG rating providers shall inform the rated entity whether its feedback has been accepted and, if not, provide a duly reasoned explanation regarding the reasons therefore. 4. If the ESG rating provider has not taken into account the entities’ feedback regarding its rating, the applied methodology, potential errors, inadequate sector classification or the use of controversies, the rated entity shall be entitled to request the ESG rating provider to make public, together with the rating, the entity’s comments on inaccurate or irrelevant data or inappropriate methodologies (“company quote”).

Amendment 345 #

Paul TANG

Proposal for a regulation
Article 16 a (new)

Article16a Use of multiple ESG rating providers 1. Where an entity or investor seeks an ESG rating from at least two ESG rating providers, it shall appoint at least one ESG rating provider with no more than 5 % market share in the Union. 2. ESMA shall annually publish on its website a list of ESG rating providers listed in the register referred to in Article 13(1), indicating their total market share in the Union. 3. For the purposes of this Article, total market share shall be measured by reference to the annual turnover generated from ESG rating activities and ancillary services, at group level in the Union.

Amendment 346 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 17 – paragraph 1

1. ESG ratings and ESG data products providers shall record their ESG rating activities. Those records shall contain the information listed in Annex II. (Amendment applies throughout article 17: ESG ratings and ESG data products providers.)

Amendment 347 #

Proposal for a regulation
Article 17 – paragraph 1

1. ESG rating providers shall record their ESG rating activities. Those records shall contain the information listed in Annexes I and II.

Amendment 348 #

Proposal for a regulation
Article 17 – paragraph 1 a (new)

1a. ESG rating providers shall keep record of key rating-related information, including rating, the rated legal entity or financial instrument, the rating type, the horizon or outlook used for the rating, the rating status and make this information available upon request to competent authorities in charge of the supervision of the regulated financial undertakings in the Union.

Amendment 349 #

Proposal for a regulation
Article 17 – paragraph 2 a (new)

2 a. ESMA shall develop draft implementing technical standards to specify the formats that ESG rating providers shall use to transmit the information for the purposes set out in paragraph 1a. ESMA shall submit those draft implementing technical standards to the Commission by [9 months after entry into force of this Regulation]. Power is delegated to the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with the procedure laid down in Article 15 of Regulation (EU) No 1095/2010.

Amendment 350 #

Proposal for a regulation
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 complaints made by rated entities.

Amendment 351 #

Proposal for a regulation
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 352 #

Proposal for a regulation
Article 18 – paragraph 2 – point a – point 4

~~(4) a proposed change to the ESG rating determination process;~~deleted

Amendment 353 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
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 354 #

Proposal for a regulation
Article 18 – paragraph 2 – point a – point 5 a (new)

(5a) the quality of ESG data distributed to regulated financial undertakings in the EU;

Amendment 355 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 18 – paragraph 2 – point a – point 5 b (new)

(5b) the methodology and sources of data used for a specific controversy report;

Amendment 356 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 18 – paragraph 2 – point b

(b) complaints are investigated in a timely and fair manner and that the outcome of the investigation is communicated to the complainant within a ~~reasonable~~ period of ~~time~~one month, unless such communication would be contrary to objectives of public policy or to Regulation (EU) No 596/2014 of the European Parliament and of the Council53 ; _________________ 53 Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, p. 1).

Amendment 357 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 18 – paragraph 2 – point c

~~(c) the inquiry is conducted independently of any personnel that has been involved in the subject-matter of the complaint.~~deleted

Amendment 358 #

Proposal for a regulation
Article 18 – paragraph 2 a (new)

2 a. By XXXX, the ESMA shall establish and operate a complaint mechanism for receiving, investigating and retaining records concerning complaints against ESG ratings or ESG data product providers made regarding ESG ratings or ESG data.

Amendment 359 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 18 – paragraph 2 b (new)

2 b. The mechanism referred to in paragraph 2a shall be public and ensure that complaints may be submitted on the following topics: (a) the sources of data used for a specific ESG rating; (b) the way in which the rating methodology in relation to a specific ESG rating has been applied; (c) whether a specific ESG rating is representative of the rated entity; (d) a proposed change to the ESG rating determination process; (e) other decisions in relation to the ESG rating; (f) the quality of ESG data distributed to regulated financial undertakings in the EU; (g) the methodology and sources of data used for a specific controversy report.

Amendment 360 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 18 – paragraph 2 c (new)

2 c. ESMA shall investigate complaints in a timely and fair manner and communicate the outcome of the investigation to the complainant within a reasonable period of time, unless such communication would be contrary to objectives of public policy or to Regulation (EU) No 596/2014 of the European Parliament and of the Council.

Amendment 361 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 19 – paragraph 1

1. ESG ratings and ESG data products providers shall not outsource important operational functions where such outsourcing would materially impair the quality of the ESG ratings and ESG data products provider’s internal control policies and procedures, or the ability of the European Supervisory and Markets Authority (ESMA) to supervise the ESG ratings and ESG data products provider’s compliance with its obligations under this Regulation. (Amendment applies throughout article 19: ESG ratings and ESG data products providers.)

Amendment 362 #

Proposal for a regulation
Article 19 – paragraph 1

1. ~~ESG rating providers shall not o~~Outsourceing of important operational functions ~~where such outsourcing would~~shall not materially impair the quality of the ESG rating provider’s internal control ~~policies and procedures, or~~and 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 363 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Article 19 – paragraph 3 a (new)

3a. ESG rating providers that outsource functions or any services or activities must not transmit confidential data or information related to rated entities unless rated entities have expressly consented to the transmission of such data or information.

Amendment 364 #

Proposal for a regulation
Article 20 – paragraph 1 – introductory part

1. ESMA may exempt an ESG ratings and ESG data products provider(s) at its request from complying with some of the requirements laid down in Article 14 where that ESG ratings and ESG data products provider(s) is able to demonstrate that those requirements are not proportionate in view of the nature, scale and complexity of its business and the nature and range of the issuance of ESG ratings and ~~provided that:~~ESG data products and provided that: (Amendment applies throughout article 20: ESG ratings and ESG data products providers.)

Amendment 365 #

Proposal for a regulation
Article 20 – paragraph 1 – introductory part

1. ESMA may exempt an ESG rating provider at its request from complying with some of the organisational requirements laid down in Article 14a (2) and (3) where that ESG rating provider is able to demonstrate that those requirements are not proportionate in view of the nature, scale and complexity of its business and the nature and range of the issuance of ESG ratings and provided that:

Amendment 366 #

Proposal for a regulation
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 and is not part of a wider group;

Amendment 367 #

Proposal for a regulation
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 368 #

Proposal for a regulation
Article 20 – paragraph 2

~~2. In the case of a group of ESG rating providers, ESMA shall ensure that at least one of the ESG rating providers in the group is not exempted from the requirements laid down in this Regulation.~~deleted

Amendment 369 #

Proposal for a regulation
Article 20 – paragraph 2

Amendment 370 #

Gilles BOYER, Stéphanie YON-COURTIN, Olivier CHASTEL

Proposal for a regulation
Title III – Chapter 1 a (new)

1a CHAPTER 1a Minimum requirements on ESG ratings methodology Article 20a - Disaggregation of E, S and G components 1. ESG rating providers shall provide for each rated entity separate E, S and G ratings. 2. Notwithstanding paragraph 1, ESG rating providers can provide a single ESG rating that aggregates E, S and G factors provided that: (a) The weight attributed to each factor is clearly communicated to ESG rating subscribers and users; (b) An explanation of the weight attributed to each factor is provided to ESG rating subscribers and users; (c) Each factor shall be attributed a factor of at least 20%. Article 20b - Impact materiality requirement 1. All ESG ratings provided by ESG rating providers shall be based, at least partly, on the impact materiality of the rated entity or financial instrument on the environment and society. Ratings or scores based solely on the ability of an entity to withstand the risks posed by ESG factors do not qualify as ESG rating. 2. Where ESG rating providers factor in financial materiality assessment in their ESG ratings, they shall make sure that this dimension does not represent more than 25% of the rating. Article 20c - Minimum requirements for each factor 1. ESG rating providers shall ensure that their methodology for the "E" factor ensures at least alignment with the 1.5°C target set by the Paris agreement. Undertakings conducting or financing new fossil fuel projects shall receive a rating in the lowest rating category. 2. ESG rating providers shall ensure that their methodology for the "S" factor is at least aligned with the core International Labour Organization (ILO) standards and the UN Guiding Principles on Business and Human Rights. 3. ESG rating providers shall ensure that their methodology for the "G" factor is at least aligned with the G20/OECD Principles of Corporate Governance and the UN Convention Against Corruption. Undertakings convicted of money- laundering, terrorist financing or tax avoidance shall receive a rating in the lowest rating category.

Amendment 371 #

Proposal for a regulation
Article 21 – title

Disclosure of the methodologies, models, and key rating assumptions and treatment of controversies used in ESG rating activities to the public

Amendment 372 #