ESMA advises against explicit ESG analysis mandate for credit rating agencies

“Credit rating agencies should not be explicitly required to consider environmental, social and corporate governance (ESG) factors when assessing issuers’ creditworthiness, according to the EU financial markets watchdog.”

This is what IPE claims right after ESMA (European Securities and Markets Authority) decision of excluding the explicit requirement of considering ESG factors when giving rating assessments.

The EU supervisory authority alleged the necessity for the regulation of Credit Rating Agencies (CRAs) to provide more disclosure on the consideration of ESG factors given in credit assessments but is not brave enough to include it permanently as a requirement.

Carmen Nuzzo, head of fixed income at the PRI, pointed out that ESMA was right in not imposing to CRA regulations the inclusion of ESG analysis, because ESG factors should be included in credit rating opinions only when they are material to what the agencies measure. And, moreover, she pointed out the necessity to introduce more transparency and regulation.

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