ESG Ratings

Overview

ESG ratings mainly focus on ESG securities, ESG bonds and ESG funds. It can evaluate the ESG performance of entities and find investment opportunities with price mismatches. ESG ratings are often co-regulated with ESG data products.
 

ESG rating agencies include traditional rating agencies and some boutique ESG rating agencies. The common ESG rating activities include ESG rating, ESG ranking, ESG data, and ESG metric.

ESG Ratings Regulations

ESG ratings can provide guidance for companies to improve sustainable disclosure and help investors establish sustainable investment portfolios. Regulatory agencies in numerous jurisdictions around the world begin to establish rules for ESG rating companies and their products.

The current important ESG rating code of conduct is issued by the International Capital Market Association, which provides the market with a framework for establishing a transparent, efficient, and trustworthy ESG rating system through voluntary compliance.

Some regulators have issued relevant regulatory policies based on ICMA’s framework. For example, Hong Kong SFC and ICMA jointly developed the Hong Kong ESG Rating and Data Product Supplier Code of Conduct. It is expected that as ESG develops in the future, these voluntary conduct may gradually transform into legally effective regulations.

Sovereign ESG Ratings

Unlike traditional corporate and financial ESG ratings, sovereign ESG ratings are used to measure a country’s ESG rating, which in turn involves asset allocation. The evaluation system and indicators of sovereign ESG ratings differ significantly from traditional ESG ratings.

With the development of  ESG, sovereign ESG ratings may become a part of sovereign ratings, playing a decisive role in the overall ESG rating in jurisdictions.

ESG Ratings

EU Proposes Regulation on ESG Rating Services

The European Union stated in its recent sustainable finance policy that it requires ESG rating services to meet the authorization and supervision of the European Securities and Markets Authority (ESMA)

ESG

ERM Releases ESG Rating Agencies Report

ERM, an international sustainability consulting company, released a report on ESG rating agencies, analyzing the current development of ESG rating agencies from both investors and enterprises, and proposing measures to improve the ESG rating ecosystem

SEBI

SEBI Issues Consultation Paper on ESG Disclosures, Ratings and Investing

The Securities and Exchange Board of India (SEBI) issued a consultation paper to solicit opinions on the ESG disclosures of listed companies, the ESG rating of the securities market and the ESG investment in the asset management industry, so as to promote a more transparent and simplified development