European regulators are consulting on proposed changes to rules governing credit rating agencies that aim to boost sustainability considerations.
The European Securities and Markets Authority (ESMA) launched a consultation on planned reforms that seek to ensure ESG factors are properly incorporated into the firms’ credit rating methodologies, and the use of those factors is adequately disclosed to investors.
ESMA said that the proposals aim to “deliver a more robust and transparent credit rating process through the consistent application of credit rating methodologies.” The regulator would require systematic documentation of ESG factors that are used in credit rating methodologies, and enhance the disclosure of the ESG factors in ratings and rating outlooks.
The deadline for feedback on the proposals in June 21.
ESMA said it will finalize its proposals by the end of 2024.