EU: ESG Ratings Regulation moves another step forward, now with draft RTS

The Council of the EU published the text of the proposed Regulation on the transparency and integrity of ESG rating activities, and amending Regulation (EU) 2019/2088 and (EU) 2023/2859 (known as the ‘ESG Ratings Regulation’) in November 2024 and it was adopted on 19 November 2024 (see Council press release).

This Regulation was then published in the OJEU on 12 December 2024 and will be in force from 1 January 2025.  It will apply 18 months following its entry into force - from 2 July 2026.

The Regulation is designed to govern the issuance, distribution and, where relevant, publication of ESG ratings, without being intended to regulate their use. Political agreement was reached on 5 February 2024 – Read our earlier client alert on our Knowledge Portal for more detail and for an overview of the Regulation.

LATEST UPDATE: 2/5/25 ESMA published a consultation paper on proposed rules (in the form of draft RTS) for ESG rating providers under the ERR.

You can read the consultation and the press release here.

The draft RTS cover the following aspects that apply to ESG rating providers:

• The information that should be provided in the applications for authorisation and recognition.
• The measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings. These are divided into organisational requirements that are applicable to all ESG rating providers, and more specific technical and control measures that apply in the case of certain specified activities.
• The information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings. This is to ensure that to the extent possible, ESG rating providers will disclose the required information in as comparable and consistent a manner as possible.

The rules are aimed at ESG ratings providers, rather than users – however, they will still be of interest to users of ESG ratings, to understand what the transparency and authorisation landscape will look like for ESG ratings providers. And if you do not consider yourself to be an ESG rating provider, a key exercise will be confirming that you are not inadvertently caught by the broad definition of an ESG rating provider (or can fall within relevant exemptions).

In terms of timing, the consultation closes on 20 June 2025. ESMA expects to publish a final report in Q4 2025 and submit the draft standards to the European Commission by end of October 2025 at the latest. 

We will shortly publish a brief note on those proposals along with a webinar to talk through the important issues they raise.