Position paper - Environmental, social and governance ratings

The American Chamber of Commerce to the European Union (AmCham EU) supports a well-functioning global capital market which integrates environmental, social and governance (ESG) considerations. The proposal to introduce a regulation on the transparency and integrity of ESG rating activities (ESG Ratings Regulation) can support this objective if it takes a proportionate approach to implementing the international standards developed by the International Organization of Securities Commissions (IOSCO).

With this objective in mind, the draft text of the regulation can be improved during the co-legislative process in the following ways:

1. The scope of the regulation and the separation of business requirements should be clarified so that it is clear to rated companies, ESG rating providers and ESG rating users which activities relating to the analysis of ESG would require a new authorisation by the European Securities and Markets Authority (ESMA) under the regulation.
2. The third-country regime should be amended to remove the arbitrary revenue threshold that would prevent international providers of ESG ratings from using the recognition route. 
3. The provisions of the regulation on safeguarding the independence of ESG rating methodologies from external interference should be maintained, in line with the IOSCO recommendations.
4. As this is a new regulated activity with a high degree of uncertainty on definitions, it is critical that firms subject to the regulation have an appropriate amount of time to prepare their businesses for authorisation. The regulation should be amended to provide a more reasonable implementation period.