Dutch watchdog pushes for regulation of ESG rating agencies
AFM, the Dutch financial market supervisor, has answered the European Commission's consultation on the renewed EU strategy for sustainable finance that closed on 15 July. Like many players, the regulator fingered a lack of comparable, consistent, relevant and reliable ESG data and defended a European single access point for both financial and non-financial information. Furthermore, AFM expressed concerns around dependency regarding the level of concentration in the field of ESG ratings and data. "Financial market participants are heavily dependent on providers of ESG data and ratings, which is at present a highly concentrated market dominated by a limited number of companies," it highlighted.
"In AFM’s view, a regulatory framework establishing minimum standards for ESG ratings and data providers, ensuring European supervision of sustainability rating agencies, would be an appropriate way to safeguard consistent and reliable standards of assessment in the ESG rating industry. The scope of these regulatory requirements and the level of supervision entailed should be proportionate to the role that ESG ratings are given within the broader regulatory framework. The AFM advocates a unified approach to the regulation of all rating providers and related sustainability assessments such as third party verification, in order to avoid a patchwork of regulatory or supervisory mandates," the supervisor penned. AFM said the European Commission should also take the lead on establishing an international reporting standard for non-financial information including ESG data.