The European Fund and Asset Management Association (Efama) has voiced significant reservations regarding the European Commission's recent unveiling of its proposal on ESG (Environmental, Social, and Governance) rating activities. While the initiative is aimed at providing greater clarity on ESG rating methodologies and addressing biases, Efama has highlighted critical areas where it believes the proposal falls short.
One primary concern raised by Efama is the necessity for a unified legislative framework governing both ESG data and ratings. Efama argues that such a framework would enhance transparency and reliability within the ESG ecosystem. Additionally, the association is advocating for a more detailed fee structure, emphasizing the need for a clearer fee grid to promote fairness principles more broadly.
Efama also questions the proposal's stance on civil liability within investor-investee relationships. While acknowledging the importance of holding asset managers accountable for their actions, Efama argues against making them responsible for the actions of companies over which they have limited control.
While recognizing the merits of the Commission's proposal, including the exclusion of internally-produced ratings by financial entities, Efama believes that further refinement is required. The ongoing dialogue between regulatory bodies and industry stakeholders is expected to play a pivotal role in shaping the future trajectory of ESG practices in Europe.
Chiara Chiodo, Regulatory Policy Advisor at Efama, commented on the matter, stating, "In the ESG rating world, transparency is the key that unlocks trust, accountability, and as a result, sustainable growth. We congratulate the Commission for the many improvements that the proposal will bring. However, we still believe that there is room to foster even more clarity and transparency for financial market participants, as well as end investors."
In summary, Efama's reservations regarding the European Commission's ESG rating proposal highlight the need for a unified legislative framework, a clearer fee structure, and careful consideration of civil liability within the ESG ecosystem. While acknowledging the proposal's positive aspects, Efama underscores the importance of further clarity and transparency in ESG practices for the benefit of both financial market participants and end investors.
By fLEXI tEAM