The European Securities and Markets Authority (ESMA) has published its long-anticipated draft Regulatory Technical Standards (RTS) under the newly adopted EU ESG Ratings Regulation, marking a significant step toward increased transparency, accountability, and consistency in the ESG ratings landscape.
The draft rules, released for public consultation, aim to strengthen the integrity and reliability of ESG ratings by imposing stricter regulatory oversight on providers operating within the European Union.
Key Provisions of the Draft Rules
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Mandatory authorization and supervision for all ESG ratings providers offering services in the EU market.
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Robust conflict-of-interest safeguards, particularly for firms engaged in both ESG ratings and consulting or advisory services.
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Public disclosure requirements covering rating methodologies, underlying assumptions, and data sources—enhancing transparency and comparability.
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Enforcement of operational separation of services, moving beyond formalistic legal structures to ensure true independence and objectivity.
These measures respond to longstanding concerns from investors and market participants about the opacity and variability in ESG assessments, which can undermine trust in sustainable finance products and strategies.
New Framework for Sustainability Disclosures
In parallel with the draft RTS, ESMA has also released new Guidelines on the Enforcement of Sustainability Information, aimed at aligning sustainability-related disclosures with the rigor of financial reporting.
Under the proposed framework:
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National regulators will be required to ramp up supervisory capacity under the Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy Regulation.
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Enforcement actions will be risk-based, with a focus on tackling greenwashing and assessing double materiality in corporate reporting.
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ESMA will play a central role in coordinating supervisory activities across EU Member States to ensure harmonized enforcement and reduce regulatory arbitrage.
What This Means for Companies
The new rules signal a new era of ESG accountability. Companies across the EU will face heightened scrutiny of their ESG data, internal controls, and governance frameworks. For C-suite leaders and sustainability officers, now is the time to proactively assess reporting processes and ensure alignment with emerging regulatory expectations.
The public consultation on the draft rules is open until June 20, 2025, with final standards expected to be adopted and published by October 2025.
At EcoActive, we continue to support businesses striving for transparent and sustainable reporting practices—whether mandated or voluntary.
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