ALFI responds to the European Commission’s consultation regarding the proposal for a regulation on the transparency and integrity of ESG rating activities

ALFI has responded to the European Commission’s request for feedback on the proposed regulation on the transparency and integrity of ESG rating activities. ALFI generally welcomes the proposed regulation but has some specific comments and suggestions.
ALFI suggests that certain cases should be exempted from the regulation’s rules, including ESG ratings shared within a group, internal ESG assessments of investments for internal use, ESG ratings or data products used within the scope of existing EU regulations, and proprietary assessments used for investment research products. ALFI believes that these cases should be exempted to avoid unnecessary regulation and to ensure clarity.
ALFI also suggests that ESG data products developed for commercial purposes by providers and raw ESG data should be included in the scope of the regulation. This inclusion would promote transparency and mitigate the risk of greenwashing. ALFI argues that the definitions and scope of ESG rating and data products should align with IOSCO’s ESG Ratings and Data Products Providers Final Report.
In terms of transparency, ALFI recommends that ESG rating providers should explicitly disclose the source of their data and the extent to which it is based on real-world reported data versus assumptions. They should also provide a detailed description of their methodologies and assumptions used to estimate results. This information is crucial for users of ESG rating and data products to make informed decisions.
ALFI also calls for enhanced transparency in fees, so that users of ESG rating and data products have clear information on sources, timestamps, fees, and pricing drivers.
Finally, ALFI suggests adding „Taxonomy alignment“ as a minimum disclosure requirement in the regulation’s Annex III, including the minimum alignment percentage disclosure. This would benefit passive funds in particular.