Making ESG ratings fit for purpose and greenwashing-proof

The document critiques the European Commission's proposal on ESG ratings, stating it fails to remedy fundamental problems like the lack of harmonized methodologies. Reclaim Finance proposes that the regulation be amended to include mandatory baseline standards—specifically aligning the 'E' factor with the 1.5°C Paris Agreement target—and minimum weighting thresholds (33% for E, 25% for S and G) to ensure ratings are not used as greenwashing tools.

• The current ESG rating market is characterized by a lack of standardization and transparency, which allows for significant divergence in ratings for the same company and enables greenwashing.
• ESG ratings often prioritize the disclosure of climate risks to the company rather than the company's actual environmental impact, meaning high scores do not necessarily indicate sustainable practices.
• Reclaim Finance asserts that the European Commission's proposal is inadequate because it discarded the harmonization of methodologies and the setting of minimum requirements for the content of ESG ratings.
• To prevent greenwashing, Reclaim Finance recommends that the 'E' factor be strictly aligned with the 1.5°C target of the Paris Agreement, requiring the cessation of fossil fuel production development and the adoption of credible transition plans.
• The document proposes minimum baseline standards for social and governance factors, specifically alignment with ILO labour standards, UN Guiding Principles on Business and Human Rights, G20/OECD Principles of Corporate Governance, and the UN Convention Against Corruption.
• Reclaim Finance recommends mandatory minimum weighting for aggregated ratings to prevent companies from masking poor environmental or social performance with high scores in other categories.

APA

Reclaim Finance (2023). Making ESG ratings fit for purpose and greenwashing-proof. https://reclaimfinance.org/site/wp-content/uploads/2023/09/Reclaim-Finance_Making-ESG-ratings-fit-for-purpose-and-greenwashing-proof-Position_paper.pdf

Chicago

Reclaim Finance. Making ESG ratings fit for purpose and greenwashing-proof. 2023. https://reclaimfinance.org/site/wp-content/uploads/2023/09/Reclaim-Finance_Making-ESG-ratings-fit-for-purpose-and-greenwashing-proof-Position_paper.pdf.

Wikipedia

{{cite press release |author=Reclaim Finance |title=Making ESG ratings fit for purpose and greenwashing-proof |date=July 2023 |url=https://reclaimfinance.org/site/wp-content/uploads/2023/09/Reclaim-Finance_Making-ESG-ratings-fit-for-purpose-and-greenwashing-proof-Position_paper.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{reclaimfinance2023making, author = {{Reclaim Finance}}, title = {{Making ESG ratings fit for purpose and greenwashing-proof}}, publisher = {Reclaim Finance}, year = {2023}, month = jul, url = {https://reclaimfinance.org/site/wp-content/uploads/2023/09/Reclaim-Finance_Making-ESG-ratings-fit-for-purpose-and-greenwashing-proof-Position_paper.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }