Council of the European Union Adopts new Regulation on Environmental, Social, and Governance Rating Activities

The Council of the European Union has adopted the proposed Regulation on ESG rating activities. The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations that ESG ratings providers carry out, and by preventing potential conflicts of interest. In particular, ESG rating providers established in the EU will need to be authorized and supervised by ESMA. They will have to comply with transparency requirements, in particular with regard to their methodology and sources of information. The Regulation introduces as a principle a separation of business and activities in order to prevent conflicts of interest. The European Parliament approved the proposed Regulation in October. The Regulation will now be published in the Official Journal of the European Union, enter into force 20 days later and apply 18 months after its entry into force.

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