The European Fund and Asset Management Association (Efama) has expressed significant reservations about the European Commission’s (EC) recent unveiling of its ESG rating activities proposal.
While the initiative aims to offer greater clarity on ESG rating methodologies and biases, Efama points out critical areas where it believes the proposal is lacking.
A primary issue raised by Efama is the need for a unified legislative framework to govern both ESG data and ratings, emphasising this would bolster transparency and reliability throughout the ESG ecosystem. The association also advocates for a more detailed fee structure, pushing for a clearer fee grid to ensure broader fairness principles.
Moreover, Efama questions the proposal’s stance on civil liability within investor-investee relationships. It contends that while asset managers must be held accountable for their actions, it’s imprudent to hold them responsible for the actions of companies they have limited control over.
While the Commission’s proposal has its merits, said Efama, the proposal could be further strengthened and aligned with international standards by improving data source transparency, ESG KPI use, measurement methodologies and the scope of business activities assessed.
Chiara Chiodo, Regulatory Policy Advisor at EFAMA, stated, “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.”
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