The European Securities and Markets Authority (ESMA) has released draft rules that will significantly tighten the regulatory framework for ESG ratings providers and sustainability reporting in the EU. These updates, grounded in the ESG Rating Regulation adopted in late 2024, are part of the EU’s broader carbon neutral strategy and ESG data transparency initiatives. 

The draft Regulatory Technical Standards (RTS) establishes new requirements for ESG ratings firms, mandating authorization, operational transparency, and robust conflict-of-interest controls. Firms must now disclose their methodologies, data sources, and assumptions used in producing ESG scores. Importantly, firms that also offer advisory or credit rating services must ensure full operational separation from their ESG ratings business. This measure is designed to eliminate superficial legal structures and strengthen credibility in ESG ratings. 

In parallel, ESMA issued updated Guidelines on Enforcement of Sustainability Information. These guidelines direct national authorities to align their oversight of ESG disclosures with financial reporting standards, particularly under the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy Regulation. The approach will be risk-based, prioritizing greenwashing and “double materiality”—a concept that considers both the impact of the company on the environment and the financial risks environmental factors pose to the business. 

Public consultation on the new rules is open until June 20, 2025, with final regulations expected in October. Once implemented, these rules will standardize ESG oversight across the EU and reduce regulatory fragmentation between Member States. 

For corporate leaders, this means increased scrutiny on ESG strategy, internal governance, and data accuracy. Companies operating within the EU must prepare for rigorous compliance expectations and evolving sustainability definitions as the bloc advances its ESG and carbon neutral strategy goals. These developments underscore the EU’s commitment to embedding sustainability into the core of corporate governance and investor protection. 

Sources: 

https://esgnews.com/esma-releases-draft-rules-to-regulate-esg-ratings-providers-under-new-eu-regulation/ 

https://www.esma.europa.eu/press-news/esma-news/esma-consults-rules-esg-rating-providers 

https://www.responsible-investor.com/regulation-round-up-esma-consults-on-rules-for-esg-rating-providers/ 

https://www.regulationtomorrow.com/france/esg-fr/esma-consults-on-technical-standards-for-esg-rating-providers/