CONSULTATIE | DUFAS response on ESG ratings and factors
Last June, the European Commission published a consultation on a proposal for a regulation on Environmental, Social and Governance (ESG) ratings and sustainability risks in credit ratings. DUFAS has, on behalf of its members, responded to the public consultation on the first of September 2023.
Cost of compliance and availability of ESG ratings and data
In our response we have stressed the importance of compliance costs remaining low to make sure that ESG ratings are affordable and available for a competitive market price for European mid to small asset managers. A too stringent authorization regime for ESG rating providers may lead to an increase of compliance costs, and may even become too high for non-commercial providers.
Legislation should be consistent globally
Many DUFAS members operate globally. It is therefore important to create a level playing field, meaning that the regulation of ESG ratings providers must be consistent with jurisdictions outside of the EU. This reduces the risk that third country ESG ratings providers exit the EU market, resulting in differences in the quality provided to non-European and European clients.
Separate code of conduct for ESG data vendors
We are supportive of the application of certain transparency rules to data vendors like ESG rating providers. For financial market participants, it is essential that ESG data vendors are transparent about their (i) fees, the (ii) source of the data, (iii) potential methodologies used and whether (iv) data are based on estimates. These transparency rules could be prescribed by means of a code of conduct scheme.
Internal ratings produced by asset managers
We welcome the proposal that internal ratings produced by the asset managers itself are exempted from the draft regulation. However, we believe that this exemption should be clarified. It needs to be clear that asset managers or any other financial undertaking for that matter should be allowed to share and publish their internal ratings.
More information
Would you like to respond, or should you have any questions? We would be pleased to hear from you. Please feel welcome to e-mail Randy Pattiselanno, DUFAS' manager strategy & regulatory affairs. Together with our Sustainability Committee, we continue to monitor and share developments on this topic with our members.
