IOGP Europe response to ESMA Consultation on the draft technical standards under the ESG Ratings Regulation

IOGP Europe welcomes the opportunity to contribute to ESMA’s consultation on the draft Regulatory Technical Standards (RTS) under the ESG Ratings Regulation.

We strongly support ESMA’s objective to enhance transparency, comparability, and accountability in ESG rating practices. While the draft RTS is a step in the right direction, several areas require further strengthening to ensure that ESG ratings are fit for purpose and aligned with broader EU sustainable finance goals.

Key recommendations

1. Address divergence and opacity

• Rating providers should transparently disclose key normative judgments embedded in their methodologies, especially where these relate to sectoral or policy expectations (e.g. energy transition timelines).

2. Ensure procedural transparency and issuer engagement

• ESMA should require rating providers to disclose whether and how they engage with rated companies.
• Upon issuer request, providers should be required to engage with minimum procedural standards to ensure fair and meaningful dialogue.

3. Standardize controversy assessment process

• Baseline criteria for the inclusion, review, and removal of controversies should be defined.
• Clear thresholds, timelines and transparency around the impact of controversies on ratings are necessary. Otherwise battling the risk of badly impacting listed companies.

4. Promote alignment with reported disclosures and prioritize use of reported data

• The RTS should promote alignment with globally recognized standards and frameworks, including the Corporate Sustainability Reporting Directive (CSRD), where applicable, and the International Sustainability Standards Board (ISSB), where relevant.
• Providers should be required to prioritize the use of audited, publicly reported data over proprietary surveys and to facilitate its efficient use across assessments. When using proprietary surveys, it should be clearly indicated.

5. Recognize forward-looking strategies

• ESG methodologies should distinguish between static performance (e.g. current emissions) and forward-looking strategies (e.g. capex commitments).
• Sectors engaged in long-term decarbonization efforts must be assessed on both present and future metrics.

6. Clarify treatment of non-public data

• ESMA should assess whether non-public input should be allowed or subject to strict restrictions.
• Where permitted, non-public inputs should be transparently disclosed, and their influence clearly indicated.