The European Commission (EC) asked 650 individuals and organisations last year for their views on the concentration of providers in the ESG ratings market and on the quality of the ESG ratings’ analyses. 74% of respondents called for action.

The European Securities and Markets Authority (ESMA), noting that ‘climate and environmental risks constitute a key source of potential financial instability’, claimed the ‘clear mandate to prevent threats to financial stability and ensure investor protection.’

Consequently, ESMA demands that the regulatory regime should be adapted to tackle not only an increased risk of greenwashing but also risks of ‘capital misallocation and product mis-selling’.

Should the EC adopt this proposal, which seems likely, this will not just mean an end to unethical selling practices of ethical ratings, it will also help forward-thinking investors allocate resources and capital to truly eco-friendly projects and to companies that take their ecological and social responsibility seriously. Our children will thank us.”

[COMMENTARY] I thought to include the above-extended quote to give importance to the fact that the EU is strongly considering regulating ESG raters.
Danger of being corrupted? ESG ratings increase risks of greenwashing, by Alpay Soyturk. May 19, 2021, Investment Week, USA.