Brussels, Jun. 13, (dpa/GNA) - The European Commission in Brussels is to propose stricter rules for assessing the sustainability of companies on Tuesday, aimed at avoiding conflicts of interest.
The main focus of the new rules is to be on greater transparency on the Environmental, Social and Corporate Governance (ESG) ratings.
These ratings assess to what extent a company’s activities impact the environment, climate and employees – and conversely, how these factors influence the company’s business.
For example, investors should be able to better assess the risk of a company becoming involved in a scandal or of environmental impacts having a negative effect on a business. Last year, the German Share Institute (DAI) pointed out that there were a lot of different methods and sometimes opaque evaluation criteria for ESG ratings.
A draft of the legislation to be presented on Tuesday, and seen by dpa, stipulates that providers of such ESG ratings will in future have to publish their methodology on their website.
In addition, they would not be allowed to advise investors or companies, assess the creditworthiness of companies, or come on board as investors themselves in the future. Any involvement in the banking, insurance or auditing sectors would also be forbidden.
Some EU lawmakers say that the new rules are too far-reaching.
German conservative parliamentarian Markus Ferber, who also works for investment counselling firm Deutsche Vermögensberatung, says that the requirements would harm market diversity and that in the end, only a few reliable providers will be available.
GNA