FROM THE EUROPEAN BANKING FEDERATION:

EBF Response: ESMA Call for Evidence on Market Characteristics for ESG Rating Providers in the EU

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BRUSSELS, 11 March 2022 – While ESG providers remain largely unregulated, their influence is expected to grow considerably. There are a series of underlying challenges, including discrepancies in ESG measurements and ongoing data quality problems. In particular:

• • Most users have difficulty understanding the underlying methodology for a specific ESG rating as ESG rating providers consider the methodologies proprietary information
  • There is little coherence between methodologies amongst ESG rating providers, resulting in significantly diverging outcomes: the same company may be considered high risk, medium risk or low risk if rated by three different agencies
  • ESG ratings do not always consider the impact and focus of an organization on the environment (double materiality) – hence there continues to be a gap between some investors’ expectations (e.g., of retail investors) and real impact
  • A clear framework with consistent global principles and harmonized standards for ESG rating (EFRAG, IOSCO and International Sustainability Standards Board), which is currently lacking, would make it possible to have a clear and objective evaluation of financial market participants from an ESG perspective

You can read the EBF’s integral response to ESMA’s Call For Feedback on Market Characteristics for ESG Rating Providers in the EU below.

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For more information:

Denisa Avermaete, Senior Policy Adviser, Susatinable Finance d.avermaete@ebf.eu

Alexia Femia, Policy Adviser, Sustainable Finance a.femia@ebf.eu

Marta Morellato, Financing Sustainable Growth trainee m.morellato@ebf.eu

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About the EBF:

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere