Date: 15th November 2023

BETTER FINANCE, alongside other NGOs, urges members of the Economic and Monetary Affairs Committee to ensure that the new ESG Regulation improves the reliability, comparability and transparency of ESG Ratings in the EU and in particular to:

1. mandate ESG ratings to follow a double materiality approach, therefore taking into consideration companies’ exposure to ESG risks, but also and most importantly their ESG impacts on the outside world being a significant part - at least 50% - of the metrics.

2. ensure balanced use of differentiated “E”, “S”, and “G” ratings, linking “E” to the degree of alignment with a 1.5°C pathway (GHG emissions reduction) and the phase-out of fossil fuels and S to international core labour and human rights standards.

3. reinforce the coherence of this Regulation with existing EU legislation (Corporate Sustainability Reporting Directive, Sustainable Finance Disclosure Regulation and the EU Taxonomy) so that data disclosed by companies is computed in meaningful ratings that can be used by investors and asset managers to channel their funds to the most sustainable companies.

4. enhance the Commission’s ambition to improve public transparency of methodologies, for instance, on assessment of ESG impact, and prevent conflicts of interests.

5. exclude from the scope of the regulation non-profit civil society organisations that put together scoreboards or rankings for non-commercial purposes and that make these freely accessible.