Is the EU doing enough on Environment, Social and Governance ratings?

Reclaim Finance criticizes the European Commission's June 2023 proposal to regulate ESG ratings, stating that while it improves transparency and conflict-of-interest rules, it fails to prevent greenwashing by omitting minimum standards for ESG factors. The author contends that without mandatory requirements—such as aligning the 'E' factor with 1.5°C transition plans and ensuring each factor represents at least 25% of the final score—companies can 'shop' for lenient providers to hide their actual environmental impact.

• The current unregulated ESG rating market lacks standardization and transparency, which enables greenwashing and hinders the mobilization of financial flows needed to limit global warming to 1.5°C.
• The European Commission's June 2023 proposal on ESG ratings is deemed inadequate because it emphasizes transparency and disclosure but does not mandate minimum requirements for the content or weights of the E, S, and G factors.
• A lack of baseline criteria allows companies to select lenient rating providers that may ignore scope 3 emissions or fossil fuel production trajectories, making it difficult for investors to identify genuine sustainability.
• The document recommends that EU policymakers amend the proposal to include minimum requirements for the 'E' factor, specifically requiring 1.5°C aligned transition plans and an immediate end to fossil fuel production development.
• To prevent unbalanced aggregated ratings where one factor (such as Governance) disproportionately outweighs others, the author proposes minimum weightings ensuring each factor represents at least 25% of the final rating.

APA

Martin, L. (2023). Is the EU doing enough on Environment, Social and Governance ratings? Reclaim Finance. https://reclaimfinance.org/site/en/2023/09/21/is-the-eu-doing-enough-on-environment-social-and-governance-ratings/

Chicago

Martin, Léo. Is the EU doing enough on Environment, Social and Governance ratings? Reclaim Finance, 2023. https://reclaimfinance.org/site/en/2023/09/21/is-the-eu-doing-enough-on-environment-social-and-governance-ratings/.

Wikipedia

{{cite press release |last1=Martin |first1=Léo |title=Is the EU doing enough on Environment, Social and Governance ratings? |publisher=Reclaim Finance |date=21 September 2023 |url=https://reclaimfinance.org/site/en/2023/09/21/is-the-eu-doing-enough-on-environment-social-and-governance-ratings/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{martin2023doing, author = {Martin, Léo}, title = {{Is the EU doing enough on Environment, Social and Governance ratings?}}, publisher = {Reclaim Finance}, year = {2023}, month = sep, url = {https://reclaimfinance.org/site/en/2023/09/21/is-the-eu-doing-enough-on-environment-social-and-governance-ratings/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }