Artikelen bij COM(2023)314 - Transparantie en integriteit van op ecologische, sociale en governancefactoren gebaseerde ratingactiviteiten

Dit is een beperkte versie

U kijkt naar een beperkte versie van dit dossier in de EU Monitor.

dossier COM(2023)314 - Transparantie en integriteit van op ecologische, sociale en governancefactoren gebaseerde ratingactiviteiten.
document COM(2023)314 EN
datum 13 juni 2023

Inhoudsopgave

Title I - SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1 - Subject-matter

This Regulation introduces a common regulatory approach to enhance the integrity, transparency, responsibility, good governance, and independence of ESG rating activities, contributing to the transparency and quality of ESG ratings. It aims to contribute to the smooth functioning of the internal market, while achieving a high level of consumer and investor protection and preventing greenwashing or other types of misinformation, including social-washing, by introducing transparency requirements related to ESG ratings and rules on the organisation and conduct of ESG rating providers.

Article 2 - Scope

1.This Regulation applies to ESG ratings issued by ESG rating providers operating in the Union that are disclosed publicly or that are distributed to regulated financial undertakings in the Union, undertakings that fall under the scope of Directive 2013/34/EU of the European Parliament and of the Council, or Union or Member States public authorities.

2.This Regulation does not apply to any of the following:

(a)private ESG ratings which are not intended for public disclosure or for distribution;

(b)ESG ratings produced by regulated financial undertakings in the Union that are used for internal purposes or for providing in-house financial services and products;

(c)the provision of raw ESG data that do not contain an element of rating or scoring, and is not subject to any modelling or analysis resulting in the development of an ESG rating;

(d)credit ratings issued pursuant to Regulation (EC) No 1060/2009 of the European Parliament and of the Council 30 ;

(e)products or services that incorporate an element of an ESG rating;

(f)second-party opinions on sustainability bonds;

(g)ESG ratings produced by Union or Member States’ public authorities;

(h)ESG ratings from an authorised ESG rating provider that are made available to users by a third party;

(i)ESG ratings produced by central banks that fulfil all of the following conditions:

(a)they are not paid for by the rated entity;

(b)they are not disclosed to the public;

(c)they are provided in accordance with the principles, standards and procedures which ensure the adequacy, integrity and independence of rating activities, as provided for by this Regulation, and

(d)they do not relate to financial instruments issued by the respective central banks’ Member States.

Article 3 - Definitions

For the purposes of this Regulation, the following definitions apply:

(1)‘ESG rating’ means an opinion, a score or a combination of both, regarding an entity, a financial instrument, a financial product, or an undertaking’s ESG profile or characteristics or exposure to ESG risks or the impact on people, society and the environment, that are based on an established methodology and defined ranking system of rating categories and that are provided to third parties, irrespective of whether such ESG rating is explicitly labelled as ‘rating’ or ‘ESG score’;

(2)‘opinion’ means an assessment that based on a rules-based methodology and defined ranking system of rating categories, involving directly a rating analyst in the rating process or systems process;

(3)‘score’ means a measure derived from data, using a rule-based methodology, and based only on a pre-established statistical or algorithmic system or model, without any additional substantial analytical input from an analyst;

(4)‘ESG rating providers’ means a legal person whose occupation includes the offering and distribution of ESG ratings or scores on a professional basis;

(5)‘regulated financial undertaking in the Union’ means an undertaking, regardless of its legal form, that is:

–(i)    a credit institution as defined in Article 4(1), point (1), of Regulation (EU) No 575/2013 of the European Parliament and of the Council 31 ;

–(ii)    an investment firm as defined in Article 4(1), point (1), of Directive 2014/65/EU the European Parliament and of the Council 32 ;

–(iii)    an alternative investment fund manager (AIFM) as defined in Article 4(1), point (b), of Directive 2011/61/EU of the European Parliament and of the Council 33 , including a manager of a qualifying venture capital fund as defined in Article 3, point (c) of Regulation (EU) No 345/2013 of the European Parliament and of the Council 34 , a manager of a qualifying social entrepreneurship fund as defined in Article 3, point (c) of Regulation (EU) No 346/2013 of the European Parliament and of the Council 35 and a manager of the ELTIF as defined in Article 2, point (12) of Regulation (EU) 2015/760 of the European Parliament and of the Council 36 ;

–(iv)    an undertaking for collective investment in transferable securities (UCITS) management company as defined Article 2(1), point (b), of Directive 2009/65/EC of the European Parliament and of the Council 37 ;

–(v)    an insurance undertaking as defined in Article 13, point (1), of Directive 2009/138/EC of the European Parliament and of the Council 38 ;

–(vi)    a reinsurance undertaking as defined in Article 13, point (4), of Directive 2009/138/EC;

–(vii)    an institution for occupational retirement provision as defined in Article 1, point (6) of Directive 2016/2341 of the European Parliament and of the Council 39 ;

–(viii)    pension institutions operating pension schemes which are considered to be social security schemes covered by Regulation (EC) No 883/2004 of the European Parliament and of the Council 40 and Regulation (EC) No 987/2009 of the European Parliament and of the Council 41 , and any legal entity set up for the purpose of investment of such social security schemes;

–(ix)    an alternative investment fund (AIF) managed by an AIFM as defined in Article 4(1), point (b), of Directive 2011/61/EU or an AIF supervised under the applicable national law;

–(x)    a UCITS as defined in Article 1(2) of Directive 2009/65/EC;

–(xi)    a central counterparty as defined in Article 2, point (1), of Regulation (EU) No 648/2012 of the European Parliament and of the Council 42 ;

–(xii)    a central securities depository as defined in Article 2(1), point (1), of Regulation (EU) No 909/2014 of the European Parliament and of the Council 43 ;

–(xiii)    an insurance or reinsurance special purpose vehicle authorised in accordance with Article 211 of Directive 2009/138/EC;

–(xiv)    a ‘securitisation special purpose entity’ as defined in Article 2, point (2), of Regulation (EU) No 2017/2402 of the European Parliament and of the Council 44 ;

–(xv)    an insurance holding company as defined in Article 212(1), point (f), of Directive 2009/138/EC or a mixed financial holding company as defined in Article 212(1), point (h), of Directive 2009/138/EC, which is part of an insurance group that is subject to supervision at the level of the group pursuant to Article 213 of that Directive and which is not exempted from group supervision pursuant to Article 214(2) of that Directive;

–(xvi)    a payment institution as defined in Article 1(1), point (d), of Directive (EU) 2015/2366 of the European Parliament and of the Council 45 ;

–(xvii)    an electronic money institution as defined in Article 2, point (1), of Directive 2009/110/EC of the European Parliament and of the Council 46 ;

–(xviii)    a crowdfunding service provider as defined in Article 2(1), point (e), of Regulation (EU) 2020/1503 of the European Parliament and of the Council 47 ;

–(xix)    a crypto-asset service provider as defined in Article 3(1), point (8), of [the proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets 48 ] where performing one or more crypto-asset services as defined in Article 3(1), point (9), of [the proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets];

–(xx)    a trade repository as defined in Article 2, point (2), of Regulation (EU) No 648/2012;

–(xxi)    a securitisation repository as defined in Article 2, point (23), of Regulation (EU) 2017/2402;

–(xxii)    an administrator of benchmarks as defined in Article 3(1), point (3), of Regulation (EU) 2016/1011 of the European Parliament and of the Council 49  ;

–(xxiii)    a credit rating agency as defined in Article 3(1), point (b), of Regulation (EC) No 1060/2009;

(6)‘rating analyst’ means a person who performs analytical functions for the purpose of issuing ESG ratings;

(7)‘rated entity’ means a legal person, a financial instrument, a financial product or a public authority or a body governed by public law which is explicitly or implicitly rated in the ESG rating or score, irrespective of whether such rating has been requested for and irrespective of whether the legal person has provided information for that ESG rating or score;

(8)‘user’ means a natural or legal person, including a public authority or a body governed by public law, to which an ESG rating is provided;

(9)‘competent authorities’ means the authorities designated by each Member State for the purposes of this Regulation;

(10)‘senior management’ means the person or persons who effectively direct the business of the ESG rating provider and the member or members of the ESG rating provider’s administrative or supervisory board.

(11)‘group of ESG rating providers' means a group of undertakings established in the Union consisting of a parent undertaking and its subsidiaries within the meaning of Article 2 of Directive 2013/34/EU, and undertakings linked to each other by a relationship and whose occupation includes the provision of ESG ratings.

TITLE II - Provision of ESG ratings in the Union

Article 4 - Requirements to provide ESG ratings in the Union

Any legal person who wishes to provide ESG ratings in the Union shall be subject to either of the following:

(a)an authorisation issued by ESMA as referred to in Article 5;

(b)an implementing decision as referred to in Article 9;

(c)an authorisation for endorsement as referred to in Article 10.

(d)a recognition as referred to in Article 11;

CHAPTER 1 - Authorisation to provide ESG ratings in the Union

Article 5 - Application for an authorisation to provide an ESG rating

1.Legal persons established in the Union that wish to provide ESG ratings in the Union shall apply for authorisation to ESMA.

2.The application for authorisation shall contain all of the information listed in Annex I and shall be submitted in any of the official languages of the Union. Council Regulation No 1 50 shall apply mutatis mutandis to any other communication between ESMA and the ESG rating providers and their staff.

3.ESMA shall develop draft regulatory technical standards to specify further the information listed in Annex I.

ESMA shall submit those draft regulatory technical standards to the Commission by XX XXXX XXXX.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

4.An authorised ESG rating provider shall comply with the conditions for initial authorisation at all times.

5.ESG rating providers shall notify ESMA of any material changes to the conditions for initial authorisation, including any opening or closing of a branch within the Union, without undue delay.

Article 6 - Examination of the application for authorisation of ESG rating providers by ESMA

1.Within 30 working days of receipt of the application referred to in Article 5(2), ESMA shall assess whether the application is complete. Where the application is not complete, ESMA shall set a deadline by which the applicant is to provide additional information.

2.After having assessed whether an application is complete, ESMA shall notify the applicant of the result of that assessment.

3.Within 120 working days of the notification referred to in paragraph 2, ESMA shall adopt a fully reasoned decision to authorise or refuse authorisation.

4.ESMA may extend the period referred to in the paragraph 3 to 140 working days in particular  where the applicant:

(a)envisages endorsing ESG ratings as referred to in Article 10;

(b)envisages using outsourcing; or

(c)requests exemption from compliance in accordance with Article 20.

5.The decision adopted by ESMA pursuant to paragraph 3 shall take effect on the fifth working day following its adoption.

Article 7 - Decision to grant or to refuse the authorisation to provide ESG ratings and notification of that decision

1.ESMA shall authorise the applicant as ESG rating provider where it concludes from the examination of the application referred to in Article 6 that the applicant complies with the conditions for the provision of ratings set out in this Regulation.

2.ESMA shall inform the applicant within five working days of that decision referred to in the first paragraph. 

3.ESMA shall inform the Commission, the EBA and EIOPA of any decision taken pursuant to paragraph 2.

4.The authorisation shall be effective for the entire territory of the Union.

Article 8 - Withdrawal or suspension of authorisation

1.ESMA shall withdraw or suspend the authorisation of an ESG rating provider in any of the following cases:

(a)the ESG rating provider has expressly renounced the authorisation or has provided no ESG ratings for nine months preceding that withdrawal or suspension;

(b)the ESG rating provider has obtained its authorisation by making false statements or by any other irregular means;

(c)the ESG rating provider no longer meets the conditions under which it was authorised;

(d)the ESG rating provider has seriously or repeatedly infringed this Regulation.

2.The decision on the withdrawal or suspension of authorisation shall take immediate effect throughout the Union.

CHAPTER 2 - Provision of ESG ratings in the Union by third country ESG rating providers

Article 9 - Equivalence decision

1.A third country ESG rating provider that wishes to provide ESG ratings in the Union shall only be able to do so where it is included in the register referred to in Article 13 and provided that all of the following conditions have been complied with:

(a)the third country ESG rating provider is a legal person, is authorised or registered as an ESG rating provider in the third country concerned, and is subject to supervision by that third country;

(b)the third country ESG rating provider has notified ESMA that it wishes to provide ESG ratings in the Union and has informed ESMA with the name of the competent authority responsible for its supervision in the third country;

(c)the Commission has adopted an equivalence decision pursuant to paragraph 2;

(d)the cooperation arrangements referred to in paragraph 4 are operational.

2.The Commission may adopt an implementing decision stating that the legal framework and supervisory practice of a third country ensures that:

(a)ESG rating providers authorised or registered in that third country comply with binding requirements which are equivalent to the requirements under this Regulation,

(b)compliance with the binding requirements referred to in point (a) is subject to effective supervision and enforcement on an on-going basis in that third country.

For the purposes of point (a), the Commission shall take into account whether the legal framework and supervisory practice of a third country ensures compliance with the IOSCO recommendations for ESG Ratings published in November 2021.

Such implementing decision shall be adopted in accordance with the examination procedure referred to in Article 47.

3.The Commission may adopt a delegated act in accordance with Article 45 to specify the conditions referred to in points (a) and (b) of the first subparagraph. The Commission may subject the application of the implementing decision referred to in paragraph 2 to:

(a)the effective fulfilment on an ongoing basis by that third country of any condition set out in that implementing decision that aims at ensuring equivalent supervisory and regulatory standards;

(b)the ability of ESMA to effectively exercise the monitoring responsibilities referred to in Article 33 of Regulation (EU) No 1095/2010.

4. ESMA shall establish cooperation arrangements with the competent authorities of third countries whose legal framework and supervisory practices have been recognised as equivalent in accordance with paragraph 2. Such arrangements shall specify all of the following:

(a)the mechanism for exchanging information between ESMA and the competent authorities of third countries concerned, including access to all relevant information requested by ESMA regarding the ESG rating provider authorised or registered in that third country;

(b)the mechanism for prompt notification to ESMA where a third country competent authority deems that the ESG rating provider authorised or registered in that third country and that is supervised by that third country competent authority is breaching the conditions of its authorisation or registration, or other national law in that third country;

(c)the procedures concerning the coordination of supervisory activities, including on-site inspections.

Article 10 - Endorsement of ESG ratings provided by a third country ESG rating provider

1.An ESG rating provider located in the Union and authorised in accordance with Article 7 may endorse ESG ratings provided by a third country ESG rating provider belonging to the same group, provided that all of the following conditions have been met:

(a)the ESG rating provider located in the Union has applied to ESMA for authorisation of such endorsement;

(b)the ESG rating provider located in the Union has verified and is able to demonstrate on an on-going basis to ESMA that the provision of the ESG rating to be endorsed fulfils requirements which are at least as stringent as the requirements of this Regulation;

(c)the ESG rating provider located in the Union has the necessary expertise to monitor the provision of ESG ratings by the third country ESG rating provider effectively, and to manage any associated risks;

(d)there is an objective reason why the third country ESG rating provider has to provide the ESG rating and why that ESG rating has to be endorsed for their use in the Union;

(e)the ESG rating provider located in the Union provides ESMA at its request with all the information necessary to enable ESMA to supervise the compliance by the third country ESG rating provider with this Regulation on an ongoing basis;

(f)where a third country ESG rating provider is subject to supervision, an appropriate cooperation arrangement is in place between ESMA and the competent authority of the third country where the ESG rating provider is located, to ensure an efficient exchange of information;

For the purposes of point (b) of the first subparagraph, ESMA may consider that compliance of the provision of the ESG rating to be endorsed with the IOSCO recommendations for ESG ratings is equivalent to compliance with the requirements of this Regulation.

2.An ESG rating provider that applies for endorsement as referred to in paragraph 1 shall provide ESMA with all information necessary to satisfy ESMA that, at the time of application, all the conditions referred to in that paragraph are fulfilled.

3.Within 90 working days of receipt of the application for endorsement referred to in paragraph 1, ESMA shall examine the application and decide either to authorise the endorsement or to refuse it. ESMA shall publicly notify the decision to endorse provided by a third country ESG rating provider.

4.An endorsed ESG rating shall be considered to be an ESG rating provided by the endorsing ESG rating provider. The endorsing provider shall not use the endorsement to avoid or circumvent the requirements of this Regulation.

5.An ESG rating provider that has endorsed an ESG rating provided by a third country ESG rating provider shall remain fully responsible for such an ESG rating and for compliance with the obligations under this Regulation.

6.Where ESMA has well-founded reasons to consider that the conditions laid down in paragraph 1 are no longer fulfilled, it shall have the power to require the endorsing ESG rating provider to cease the endorsement.

Article 11 - Recognition of third country ESG rating providers

1.Until the Commission has adopted an equivalence decision as referred to in Article 9 or, where adopted, in the event that the equivalence decision is repealed, third country ESG rating providers with an annual net turnover on their ESG rating activities below EUR 12 million for three consecutive years may provide ESG ratings to regulated financial undertakings in the Union, provided that ESMA has recognised that third country ESG rating provider in accordance with this paragraphs XX and YY.

2.Third country ESG rating providers that wish to be recognised as referred to in paragraph 1 shall comply with the requirements established in this Regulation and apply for recognition to ESMA. ESG rating providers may fulfil that condition by applying the IOSCO recommendations on ESG ratings provided that such application is equivalent to compliance with the requirements established in this Regulation.

For the purposes of the first subparagraph, ESMA may take into account either an assessment by an independent external auditor or a certification of the competent authority of the third country where the third country ESG rating provider is located.

3.Third country ESG rating providers that wish to be recognised as referred to in paragraph 1 shall have a legal representative. That legal representative shall be a legal person located in the Union and expressly appointed by that third country ESG rating provider to act on behalf of that ESG rating provider with regard to that ESG rating provider’s obligations under this Regulation and, in that respect, be accountable to ESMA.

4.The third country ESG rating provider shall provide ESMA, prior to the recognition referred to in paragraph 1, with the following information:

(a)all information necessary to satisfy ESMA that that third country ESG rating provider has established all the necessary arrangements to meet the requirements referred to in paragraph 2;

(b)the list of its actual or prospective ESG ratings which are intended for provision in the Union;

(c)where applicable, the name and contact details of the competent authority in the third country responsible for its supervision.

ESMA shall verify that the conditions laid down in paragraphs 2 and 3 are fulfilled within 90 working days of receipt of the application referred to in the first subparagraph of this paragraph.

5.ESMA shall recognise the third country ESG rating provider as referred to in paragraph 1 provided that all of the following conditions are met:

(a)the third country ESG rating provider has complied with all the conditions laid down in paragraphs 2, 3 and 4

(b)where the third country ESG rating provider is subject to supervision, ESMA shall seek to put in place an appropriate cooperation arrangement with the relevant competent authority of the third country where the ESG rating provider is located, to ensure an efficient exchange of information;

6.No recognition shall be granted where the effective exercise by ESMA of its supervisory functions under this Regulation is either prevented by the laws, regulations or administrative provisions of the third country where the third country ESG rating provider is established, or, where applicable, by limitations in the supervisory and investigatory powers of that third country’s competent authority.

7.ESMA shall impose fines, in accordance with Article 30, suspend or, where appropriate, withdraw the recognition referred to in paragraph 1 where it has well-founded reasons, based on documented evidence, to consider that the ESG rating provider:

(a)is acting, or has been acting, in a manner which is clearly prejudicial to the interests of users of its ESG ratings or to the orderly functioning of markets;

(b)has seriously infringed the applicable requirements set out in this Regulation;

(c)made false statements or used any other irregular means to obtain the recognition.

8.ESMA shall develop draft regulatory technical standards to determine the form and content of the application referred to in paragraph 2 and, in particular, the presentation of the information required in paragraph 4. ESMA shall submit them to the Commission.

Power is conferred on the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 12 - Cooperation arrangements

1.Any cooperation arrangement as referred to in Article 9(4), Article 10(1), point (f) and Article 11(5), point (b), shall be subject to guarantees of professional secrecy which are at least equivalent to those set out in Article 44. The exchange of information performed under such cooperation arrangements shall be intended for the performance of the tasks of ESMA or the competent authorities.

2.With regard to transfer of personal data to a third country, ESMA shall apply Regulation (EU) 2018/1725 of the European Parliament and of the Council 51 .

CHAPTER 3 - Register and accessibility of information

Article 13 - Register of ESG rating providers and accessibility of information on the European Single Access Point (ESAP)

1.ESMA shall establish and maintain a register that contains information on all of the following:

(a)the identities of the ESG rating providers authorised pursuant to Article 7;

(b)the identities of third country ESG rating providers that comply with the conditions laid down in Article 9 and the third country competent authorities responsible for the supervision of those third country ESG rating providers;

(c)the identities of the endorsing ESG rating provider and the endorsed third country ESG rating provider referred to in Article 10, and, where applicable, the third country competent authorities that are responsible for the supervision of the endorsed third country ESG rating provider;

(d)the identities of the third country ESG rating providers that have been recognised in accordance with Article 11, and, where applicable, the third country competent authorities responsible for the supervision of those third country ESG rating providers;

2.The register referred to in paragraph 1 shall be publicly accessible on the website of ESMA and shall be updated promptly, as necessary.

3.From 1 January 2028, when making public any information pursuant to Article 18(1) and 21(1), the ESG rating provider shall submit that information to the relevant collection body referred to in paragraph 6 of this Article at the same time for accessibility on ESAP established under Regulation (EU) XX/XXXX [ESAP Regulation] of the European Parliament and of the Council*.

4.That information shall comply with all of the following requirements:

(a)the information shall be prepared in a data extractable format as defined in Article 2, point (3), of Regulation (EU) XX/XXXX [ESAP Regulation] or, where required under Union law, in a machine-readable format, as defined in Article 2, point (4), of Regulation (EU) XX/XXXX [ESAP Regulation];

(b)the information shall be accompanied by the following metadata:

(1)all the names of the ESG rating provider submitting the information;

(2)the legal entity identifier of the ESG rating provider as specified pursuant to Article 7(4) of Regulation (EU) XX/XXXX [ESAP Regulation];

(3)the size of the ESG rating provider as specified pursuant to Article 7(4) of Regulation (EU) XX/XXXX [ESAP Regulation];

(4)the type of information as classified pursuant to Article 7(4) of Regulation (EU) XX/XXXX [ESAP Regulation];

(5)metadata specifying whether the information includes personal data.

5.For the purposes of paragraph 1, point (b)(ii) the ESG rating provider shall acquire the legal entity identifier as specified pursuant to Article 7(4) of Regulation (EU) XX/XXXX [ESAP Regulation].

6.For the purposes of making accessible on ESAP the information referred to in paragraph 1, the collection body as defined in Article 2, point (2), of Regulation (EU) XX/XXXX [ESAP Regulation] shall be ESMA.

7.From 1 January 2028, the information referred to in paragraph 1 and in Articles 10(3), 33(1), 34 and 35 shall be made accessible on ESAP. For that purpose, the collection body as defined in Article 2, point (2), of that Regulation shall be ESMA. That information shall be prepared in a data extractable format as defined in Article 2, point (3), of Regulation (EU) XX/XXXX [ESAP Regulation], include the metadata as regards the names and, where available, the legal entity identifier of the ESG rating provider as specified pursuant to Article 7(4) of that Regulation, the type of information as classified pursuant to Article 7(4) of that Regulation and whether the information includes personal data.

8.For the purposes of ensuring an efficient collection and administration of data submitted in accordance with paragraph 3, ESMA shall develop draft implementing technical standards to specify:

(a)any other metadata to accompany the information;

(b)the structuring of data in the information;

(c)for which information a machine-readable format is required and which machine-readable format is to be used.

Before developing the draft implementing technical standards, ESMA shall carry out a cost-benefit analysis. For the purposes of point (c), ESMA shall assess the advantages and disadvantages of different machine-readable formats and conduct appropriate field tests.

ESMA shall submit those draft implementing technical standards to the Commission.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

9.If necessary, ESMA shall adopt guidelines for entities to ensure that the metadata submitted in accordance with paragraph 8, first subparagraph, point (a), is correct.

TITLE III - INTEGRITY AND RELIABILITY OF ESG RATING ACTIVITIES

CHAPTER 1 - Organisational requirements, processes and documents concerning governance

Article 14 - General principles

1.ESG rating providers shall ensure the independence of their rating activities, including from all political and economic influences or constraints.

2.ESG rating providers shall have in place rules and procedures that ensure that their ESG rating are provided and published or made available in accordance with this Regulation.

3.ESG rating providers shall employ systems, resources and procedures that are adequate and effective to comply with their obligations under this Regulation.

4.ESG rating providers shall adopt and implement written policies and procedures that ensure that their ESG ratings are based on a thorough analysis of all relevant information available to them.

5.ESG rating providers shall adopt and implement internal due diligence policies and procedures that ensure that their business interests do not impair the independence or accuracy of the assessment activities.

6.ESG rating providers shall adopt and implement sound administrative and accounting procedures, internal control mechanisms, and effective control and safeguard arrangements for information processing systems.

7.ESG rating providers shall use rating methodologies for the ESG ratings they provide that are rigorous, systematic, objective and capable of validation and shall apply those rating methodologies continuously.

8.ESG rating providers shall review the rating methodologies referred to in paragraph 6 on an on-going basis and at least annually.

9.ESG rating providers shall monitor and evaluate the adequacy and effectiveness of the systems, resources and procedures referred to in paragraph 2 at least annually and take appropriate measures to address any deficiencies.

10.ESG rating providers shall establish and maintain a permanent and effective oversight function to ensure oversight of all aspects of the provision of their ESG ratings.

ESG rating providers shall develop and maintain robust procedures regarding their oversight function.

11.ESG rating providers shall adopt, implement, and enforce measures to ensure that their ESG ratings are based on a thorough analysis of all the information that is available to them and that is relevant to their analysis in accordance with their rating methodologies. They shall adopt all necessary measures to ensure that the information they use in assigning ESG ratings is of sufficient quality and from reliable sources. ESG rating providers shall explicitly mention that their ESG ratings are their own opinion .

12.ESG rating providers shall not disclose information about their intellectual capital, intellectual property, know-how or the results of innovation that would qualify as trade secrets as defined in Article 2, point (1), of Directive (EU) 2016/943 of the European Parliament and of the Council 52 .

13.ESG rating providers shall only make changes to their ESG ratings in accordance with their rating methodologies  published pursuant to Article 21.

Article 15 - Separation of business and activities

1.ESG rating providers shall not provide any of the following activities:

(a)consulting activities to investors or undertakings;

(b)the issuance and sale of credit ratings;

(c)the development of benchmarks;

(d)investment activities;

(e)audit activities;

(f)banking, insurance, or reinsurance activities.

2.ESG rating providers shall ensure that the provision of other services than those referred to in paragraph 1 does not create risks of conflicts of interest within its ESG rating activities.

Article 16 - Rating analysts, employees and other persons involved in the provision of ESG ratings

1.ESG rating providers shall ensure that rating analysts, employees and any other natural person whose services are placed at its disposal or under its control and who are directly involved in the provision of ESG ratings, including analysts directly involved in the rating process and persons involved in the provision of scores, have the knowledge and experience that is necessary for the performance of the duties and tasks assigned.

2.ESG rating providers shall ensure that the persons referred to in paragraph 1 are not allowed to initiate or participate in negotiations regarding fees or payments with any rated entity or any person directly or indirectly linked to the rated entity by control.

3.The persons referred to in paragraph 1 shall not buy or sell any financial instrument issued, guaranteed, or otherwise supported by any rated entity other than holdings in diversified collective investment schemes, including managed funds, nor engage in any transaction in such financial instruments.

4.The persons referred to in paragraph 1 shall not participate in or otherwise influence the determination of an ESG rating of any rated entity where those persons:

(a)own financial instruments of the rated entity, other than holdings in diversified collective investment schemes;

(b)own financial instruments of any entity related to a rated entity, the ownership of which may cause or may be generally perceived as causing a conflict of interest, other than holdings in diversified collective investment schemes;

(c)have had a recent employment, business or other relationship with the rated entity that may cause or may be generally perceived as causing a conflict of interest.

5.ESG rating providers shall ensure that the persons referred to in paragraph 1:

(a)take all reasonable measures to protect property and records in possession of the ESG rating provider from fraud, theft or misuse, taking into account the nature, scale and complexity of the ESG rating provider’s business and the nature and range of ESG rating activities;

(b)do not share confidential information that has been entrusted to the ESG rating provider with anyone who is not directly involved in the provision ofESG rating activities, including rating analysts and employees of any person directly or indirectly linked to the ESG rating provider by control, and any other natural person whose services are or have been placed at the disposal of, or are under the control of, any person directly or indirectly linked to the ESG rating provider by control;

(c)do not use or share confidential information for any other purpose than the provision of ESG rating activities, including for the trading of financial instruments.

6.Persons as referred to in paragraph 1 that consider that any other person as referred to in paragraph 1 has engaged in conduct that they consider to be illegal shall immediately inform the compliance function thereof. The ESG rating provider shall ensure that such reporting does not have any negative consequences for the person reporting.

7.Where a rating analyst terminates his or her employment with the ESG rating provider and joins a rated entity which he or she has been involved in rating, the ESG rating provider shall review the work of the rating analyst over one year preceding his or her departure.

8.Persons as referred to in paragraph 1 shall not take up a key management position within a rated entity which they have been involved in rating for six months after the provision of such rating.

Article 17 - Record-keeping requirements

1.ESG rating providers shall record their ESG rating activities. Those records shall contain the information listed in Annex II.

2.ESG rating providers shall keep the information referred to in paragraph 1 for at least five years and in such a form that it is possible to replicate and fully understand the determination of an ESG rating.

Article 18 - Complaints-handling mechanism

1.ESG rating providers shall have in place and publish on their website procedures for receiving, investigating and retaining records concerning complaints made.

2.The procedures referred to in paragraph 1 shall ensure that:

(a)the ESG rating provider makes publicly available the complaints-handling policy through which complaints may be submitted on:

(1)the sources of data used for a specific ESG rating;

(2)the way in which the rating methodology in relation to a specific ESG rating has been applied;

(3)whether a specific ESG rating is representative of the rated entity;

(4)a proposed change to the ESG rating determination process;

(5)other decisions in relation to the ESG rating;

(b)complaints are investigated in a timely and fair manner and that the outcome of the investigation is communicated to the complainant within a reasonable period of time, unless such communication would be contrary to objectives of public policy or to Regulation (EU) No 596/2014 of the European Parliament and of the Council 53 ;

(c)the inquiry is conducted independently of any personnel that has been involved in the subject-matter of the complaint.

Article 19 - Outsourcing

1.ESG rating providers shall not outsource important operational functions where such outsourcing would materially impair the quality of the ESG rating provider’s internal control policies and procedures, or the ability of the European Supervisory and Markets Authority (ESMA) to supervise the ESG rating provider’s compliance with its obligations under this Regulation.

2.ESG rating providers that outsource functions or any services or activities that are relevant for the provision of an ESG rating shall remain fully responsible for discharging all of the obligations under this Regulation.

3.ESG rating providers that outsource functions or any services or activities that are relevant for the provision of an ESG rating shall remain fully responsible for disclosing the information referred to in Annex II.

Article 20 - Exemptions on governance requirements

1.ESMA may exempt an ESG rating provider at its request from complying with some of the requirements laid down in Article 14 where that ESG rating provider is able to demonstrate that those requirements are not proportionate in view of the nature, scale and complexity of its business and the nature and range of the issuance of ESG ratings and provided that:

(a)the ESG rating provider is a small or medium-sized undertaking according to the criteria laid down in Article 3 of Directive 2013/34/EU;

(b)the ESG rating provider has implemented measures and procedures, and in particular internal control mechanisms, reporting arrangements and measures, that ensure the independence of rating analysts and persons approving ESG ratings and that ensure the effective compliance with this Regulation;

(c)the size of the ESG rating provider is not determined in such a way as to avoid compliance with the requirements of this Regulation by an ESG rating provider or a group of ESG rating providers.

2.In the case of a group of ESG rating providers, ESMA shall ensure that at least one of the ESG rating providers in the group is not exempted from the requirements laid down in this Regulation.

CHAPTER 2 - Transparency requirements

Article 21 - Disclosure of the methodologies, models, and key rating assumptions used in ESG rating activities to the public

1.ESG rating providers shall disclose on their website the methodologies, models and key rating assumptions they use in their ESG rating activities, including the information referred to in point 1 of Annex III.

2.ESMA shall develop draft regulatory technical standards to specify further the elements that are to be disclosed in accordance with paragraph 1.

3.ESMA shall submit those draft regulatory technical standards to the Commission by XX XXXX XXXX.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 22 - Disclosures to subscribers of ESG ratings and rated entities

1.ESG rating providers shall disclose, as a minimum, the information referred to in point 2 of Annex III to their subscribers and to the rated entities.

2.ESMA shall develop draft regulatory technical standards to specify further the elements that are to be disclosed in accordance with paragraph 1.

3.ESMA shall submit those draft regulatory technical standards to the Commission by XX XXXX XXXX.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

CHAPTER 3 - Independence and conflicts of interest

Article 23 - Independence and avoidance of conflicts of interest

1.ESG rating providers shall have in place robust governance arrangements, including a clear organisational structure with well-defined, transparent, and consistent roles and responsibilities for all persons involved in the provision of an ESG rating.

2.ESG rating providers shall take all necessary steps to ensure that any ESG rating provided is not affected by any existing or potential conflict of interest, or by any business relationship, either from the ESG rating provider itself or from their shareholders, managers, rating analysts, employees or any other natural person whose services are placed at the disposal or under the control of the ESG rating providers, or any person directly or indirectly linked to them by control.

3.Where there is a risk of a conflict of interest within an ESG rating provider due to the ownership structure, controlling interests, or activities of that ESG rating provider, of any entity owning or controlling the ESG rating provider, of an entity that is owned or controlled by the ESG rating provider, or of any the ESG rating provider’s affiliates, ESMA may require the ESG rating provider to take measures to mitigate that risk. Such measures may include the establishment of an independent oversight function representing stakeholders, including users of the ESG ratings and contributors to such ratings, in a balanced manner.

Where a conflict of interest as referred to in the first subparagraph cannot be adequately managed, ESMA may require the ESG rating provider to cease the activities or relationships that create the conflict of interest, or may require the ESG rating provider to cease providing the ESG ratings.

4.ESG rating providers shall disclose to ESMA all existing or potential conflicts of interest, including conflicts of interest arising from the ownership or control of the ESG rating providers.

5.ESG rating providers shall establish and operate policies, procedures, and effective organisational arrangements for the identification, disclosure, prevention, management and mitigation of conflicts of interest. ESG rating providers shall regularly review and update those policies, procedures and arrangements. Those policies, procedures and arrangements shall specifically prevent, manage and mitigate conflicts of interest due to the ESG rating provider’s ownership or control or due to other interests in the ESG rating provider’s group, or conflicts of interest that are caused by other persons that exercise influence or control over the ESG rating provider in relation to determining the ESG rating.

6.ESG rating providers shall review their operations to identify potential conflicts of interests at least each year.

Article 24 - Management of potential conflicts of interests from employees

1.ESG rating providers shall ensure that their employees and any other natural persons whose services are placed at their disposal or under their control and who are directly involved in the provision of an ESG rating:

(a)have the skills that are necessary for performing their tasks and duties and are subject to effective management and supervision;

(b)are not subject to undue influence or conflicts of interest;

(c) that the compensation and performance evaluation of those persons do not create conflicts of interest or otherwise impinge upon the integrity of the ESG rating determination process;

(d)do not have any interests or business connections that compromise the activities of the ESG rating provider;

(e)are prohibited from contributing to an ESG rating determination by way of engaging in bids, offers and trades on a personal basis or on behalf of market participants, except where such contribution is explicitly required as part of the ESG rating methodology and is subject to specific rules laid down therein;

(f)are subject to effective procedures to control the exchange of information with other employees involved in activities that may create a risk of conflicts of interest or with third parties, where that information may affect the ESG rating.

2.ESG rating providers shall establish specific internal control procedures to ensure the integrity and reliability of the employee or person determining the ESG rating, including internal sign-off by management before the dissemination of the ESG rating.

Article 25 - Fair, reasonable, transparent and non-discriminatory treatment of users of ESG ratings

1.ESG rating providers shall take steps that are adequate to ensure that fees charged to clients are fair, reasonable, transparent, non-discriminatory and are based on costs.

2.For the purposes of paragraph 1, ESMA may require ESG rating providers to provide it with documented evidence, may take supervisory measures in accordance with Article 33, and may decide to impose fines in accordance with Article 34 where it finds that fees from ESG rating providers are not fair, reasonable, transparent, non-discriminatory and not based on actual costs.

CHAPTER 4 - Supervision by ESMA

Section 1 - General principles


Article 26 - Non-interference with the content of ratings or methodologies

In carrying out their duties under this Regulation, ESMA, the Commission or any public authorities of a Member State shall not interfere with the content of ESG ratings or methodologies.

Article 27 - ESMA

1.In accordance with Article 16 of Regulation (EU) No 1095/2010, ESMA shall issue and update guidelines on the cooperation between ESMA and the competent authorities for the purposes of this Regulation, including the procedures and detailed conditions relating to the delegation of tasks.

2.In accordance with Article 16 of Regulation (EU) No 1095/2010, ESMA shall, in cooperation with the EBA and EIOPA, issue and update guidelines on the application of the endorsement regime referred to in Article 10 of this Regulation by XX XXXX XXXX.

3.ESMA shall publish an annual report on the application of this Regulation, including on supervisory measures taken and penalties imposed by ESMA under this Regulation, including fines and periodic penalty payments. That report shall contain, in particular, information on the evolution of ESG Ratings market and an assessment of the application of the third country regimes referred to in Articles 9, 10 and 11.

ESMA shall present the annual report referred to in the first subparagraph to the European Parliament, the Council and the Commission.

4.ESMA shall cooperate with the EBA and EIOPA in performing its tasks and shall consult the EBA and EIOPA before issuing and updating guidelines and submitting draft regulatory technical standards.

Article 28 - Competent authorities

1.By XX XXXX XXXX, each Member State shall designate a competent authority for the purposes of this Regulation.

2.Competent authorities shall be adequately staffed, with regard to capacity and expertise, to be able to apply this Regulation.

Article 29 - Exercise of the powers referred to in Articles 30 to 32

The powers conferred on ESMA or any official of or other person authorised by ESMA by Articles 30 to 32 shall not be used to require the disclosure of information or documents which are subject to legal privilege.

Article 30 - Requests for information

1.ESMA may by simple request or by decision require ESG rating providers, persons involved in ESG rating activities, rated entities, third parties to whom the ESG rating providers have outsourced operational functions or activities, and persons otherwise closely and substantially related or connected to ESG rating providers or ESG rating activities, to provide all information that it needs to carry out its duties under this Regulation.

2.When sending a simple request for information under paragraph 1, ESMA shall:

(a)refer to this Article as the legal basis for the request;

(b)state the purpose of the request;

(c)specify what information is required;

(d)set a time-limit within which the information is to be provided;

(e)inform the person from whom the information is requested that there is no obligation to provide the information but that any reply to the request for information must not be incorrect or misleading;

(f)indicate the fine provided for in Article 34, where the answers to questions asked are incorrect or misleading.

3.When requiring the supply of information under paragraph 1 by decision, ESMA shall:

(a)refer to this Article as the legal basis for the request;

(b)state the purpose of the request;

(c)specify what information is required;

(d)set a time-limit within which the information is to be provided;

(e)indicate the periodic penalty payments provided for in Article 35 where the production of the required information is incomplete;

(f)indicate the fine provided for in Article 34, where the answers to questions asked are incorrect or misleading;

(g)indicate the right to appeal the decision before the Board of Appeal and to have the decision reviewed by the Court of Justice of the European Union in accordance with Articles 60 and 61 of Regulation (EU) No 1095/2010.

4.The persons referred to in paragraph 1 or their representatives and, in the case of legal persons or of associations having no legal personality, the persons authorised to represent them by law or by their constitution, shall supply the information requested. Lawyers duly authorised to act may supply the information on behalf of their clients. Those clients shall remain fully responsible if the information supplied by the lawyers is incomplete, incorrect or misleading.

5.ESMA shall, without delay, send a copy of the simple request or of its decision to the competent authority of the Member State where the persons referred to in paragraph 1 who are concerned by the request for information are domiciled or established.

Article 31 - General investigations

1.In order to carry out its duties under this Regulation, ESMA may conduct all necessary investigations of persons referred to in Article 30(1). To that end, the officials of and other persons authorised by ESMA shall be empowered to:

(a)examine any records, data, procedures and any other material relevant to the execution of its tasks irrespective of the medium on which they are stored;

(b)take or obtain certified copies of or extracts from such records, data, procedures and other material;

(c)summon and ask any person referred to in Article 30(1),or their representatives or staff for oral or written explanations on facts or documents related to the subject matter and purpose of the inspection and to record the answers;

(d)interview any other natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation;

(e)request records of telephone and data traffic.

2.The officials of and other persons authorised by ESMA for the purposes of the investigations referred to in paragraph 1 shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the investigation. That authorisation shall also indicate the periodic penalty payments provided for in Article 35(1) where the production of the required records, data, procedures or any other material, or the answers to questions asked of the persons referred to in Article are not provided or are incomplete, and the fines provided for in Article 34, where the answers to questions asked of the persons referred to in Article are incorrect or misleading.

3.The persons referred to in Article 30(1) shall submit to investigations launched on the basis of a decision of ESMA. The decision shall specify the subject matter and purpose of the investigation, the periodic penalty payments provided for in Article 3, the legal remedies available under Regulation (EU) No 1095/2010 and the right to have the decision reviewed by the Court of Justice of the European Union.

4.In good time before the investigation, ESMA shall inform the competent authority of the Member State where the investigation is to be carried out of the investigation and of the identity of the authorised persons. Officials of the competent authority concerned shall, upon the request of ESMA, assist those authorised persons in carrying out their duties. Officials of the competent authority concerned may also attend the investigations upon request.

5.If a request for records of telephone or data traffic referred to in point (e) of paragraph 1 requires authorisation from a judicial authority according to national rules, such authorisation shall be applied for. Such authorisation may also be applied for as a precautionary measure.

6.Where authorisation as referred to in paragraph 5 is applied for, the national judicial authority shall control that the decision of ESMA is authentic and that the coercive measures envisaged are neither arbitrary nor excessive having regard to the subject matter of the investigations. In its control of the proportionality of the coercive measures, the national judicial authority may ask ESMA for detailed explanations, in particular relating to the grounds ESMA has for suspecting that an infringement of this Regulation has taken place and the seriousness of the suspected infringement and the nature of the involvement of the person subject to the coercive measures. However, the national judicial authority shall not review the necessity for the investigation or demand that it be provided with the information on ESMA's file. The lawfulness of ESMA's decision shall be subject to review only by the Court of Justice of the European Union following the procedure set out in Regulation (EU) No 1095/2010.

Article 32 - On-site inspections

1.In order to carry out its duties under this Regulation, ESMA may conduct all necessary on-site inspections at the business premises of the legal persons referred to in Article 30(1). Where the proper conduct and efficiency of the inspection so require, ESMA may carry out the on-site inspection without prior announcement.

2.The officials of and other persons authorised by ESMA to conduct an on-site inspection may enter any business premises and land of the legal persons subject to an investigation decision adopted by ESMA and shall have all the powers stipulated in Article 31(1). They shall also have the power to seal any business premises and books or records for the period of, and to the extent necessary for, the inspection.

3.The officials of and other persons authorised by ESMA to conduct an on-site inspection shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the inspection, and the periodic penalty payments provided for in Article 31 where the persons concerned do not submit to the inspection. In good time before the inspection, ESMA shall give notice of the inspection to the competent authority of the Member State where it is to be conducted.

4.The persons referred to in Article 30(1) shall submit to on-site inspections ordered by decision of ESMA. The decision shall specify the subject matter and purpose of the inspection, specify the date on which it is to begin and indicate the periodic penalty payments provided for in Article 31, the legal remedies available under Regulation (EU) No 1095/2010 as well as the right to have the decision reviewed by the Court of Justice of the European Union. ESMA shall take such decisions after consulting the competent authority of the Member State where the inspection is to be conducted.

5.Officials of, as well as those authorised or appointed by, the competent authority of the Member State where the inspection is to be conducted shall, upon the request of ESMA, actively assist the officials of and other persons authorised by ESMA. To that end, they shall enjoy the powers set out in paragraph 2. Officials of the competent authority of the Member State concerned may also attend the on-site inspections upon request.

6.ESMA may also require competent authorities to carry out specific investigatory tasks and on-site inspections as provided for in this Article and in Article 31(1) on its behalf. To that end, competent authorities shall enjoy the same powers as ESMA as set out in this Article and in Article 31(1).

7.Where the officials of and other accompanying persons authorised by ESMA find that a person opposes an inspection ordered pursuant to this Article, the competent authority of the Member State concerned shall afford them the necessary assistance, requesting, where appropriate, the assistance of the police or of an equivalent enforcement authority, so as to enable them to conduct their on-site inspection.

8.If the on-site inspection provided for in paragraph 1 or the assistance provided for in paragraph 7 requires authorisation by a judicial authority according to national rules, such authorisation shall be applied for. Such authorisation may also be applied for as a precautionary measure.

9.Where authorisation as referred to in paragraph 8 is applied for, the national judicial authority shall control that the decision of ESMA is authentic and that the coercive measures envisaged are neither arbitrary nor excessive having regard to the subject matter of the inspection. In its control of the proportionality of the coercive measures, the national judicial authority may ask ESMA for detailed explanations, in particular relating to the grounds ESMA has for suspecting that an infringement of this Regulation has taken place and the seriousness of the suspected infringement and the nature of the involvement of the person subject to the coercive measures. However, the national judicial authority shall not review the necessity for the inspection or demand to be provided with the information on ESMA's file. The lawfulness of ESMA's decision shall be subject to review only by the Court of Justice of the European Union following the procedure set out in Regulation (EU) No 1095/2010.

Section 2 - Administrative sanctions and other administrative measures


Article 33 - Supervisory measures by ESMA

1.Where ESMA’ finds that a ESG rating provider has not complied with its obligations under this Regulation, it shall take one or more of the following supervisory measures:

(a)withdraw the authorisation of the ESG rating provider;

(b)temporarily prohibit the ESG rating provider from providing ESG ratings, until the infringement has been brought to an end;

(c)suspend the use of the ESG ratings provided by the ESG rating provider, until the infringement has been brought to an end;

(d)require the ESG rating provider to bring the infringement to an end;

(e)impose fines pursuant to Article 34;

(f)issue public notices.

2.The supervisory measures referred to in paragraph 1 shall be effective, proportionate, and dissuasive.

3.When taking the supervisory measures referred to in paragraph 1, ESMA shall take into account the nature and seriousness of the infringement, having regard to the following criteria:

(a)the duration and frequency of the infringement;

(b)whether financial crime has been occasioned, facilitated or otherwise attributable to the infringement;

(c)whether the infringement has been committed intentionally or negligently;

(d)the degree of responsibility of the person responsible for the infringement;

(e)the financial strength of the ESG rating provider, as indicated by its total annual net turnover;

(f)the impact of the infringement on retail investors’ interests;

(g)the importance of the profits gained and losses avoided by the ESG rating provider or the losses for third parties derived from the infringement, insofar as such profits and losses can be determined;

(h)the level of cooperation of the ESG rating provider with ESMA, without prejudice to the need to ensure disgorgement of profits gained or losses avoided by that ESG rating provider;

(i)previous infringements by the ESG rating provider;

(j)measures taken after the infringement by the ESG rating provider to prevent its repetition.

4.ESMA shall notify any action taken pursuant to paragraph 1 to the person responsible for the infringement without undue delay. ESMA shall publish any such action on its website within 10 working days from the date when it was adopted.

The publication referred to in the first subparagraph shall contain all of the following:

(a)a statement affirming the right of the ESG rating provider to appeal the decision;

(b)where relevant, a statement affirming that an appeal has been lodged and specifying that such an appeal does not have suspensive effect;

(c)a statement asserting that it is possible for ESMA to suspend the application of the contested decision in accordance with Article 60(3) of Regulation (EU) No 1095/2010.

Article 34 - Fines

1.Where ESMA finds that an ESG rating provider, or, where applicable, its legal representative, has, intentionally or negligently, infringed this Regulation, it shall adopt a decision imposing a fine. The maximum amount of the fine shall be 10 % of the total annual net turnover of the ESG rating provider, calculated on the basis of the most recent available financial statements approved by the management body of the ESG rating provider.

2.Where the ESG ratings provider is a parent undertaking or a subsidiary of a parent undertaking which is required to prepare consolidated financial accounts pursuant to Directive 2013/34/EU, the relevant total annual net turnover shall be either the total annual net turnover, or the corresponding type of income in accordance with the relevant Union law in the area of accounting, according to the most recent available consolidated accounts approved by the management body of the ultimate parent undertaking.

3.When determining the level of a fine pursuant to paragraph 1, ESMA shall take into account the criteria set out in Article 33(3).

4.Notwithstanding paragraph 3, where the ESG rating provider has directly or indirectly benefited financially from the infringement, the amount of the fine shall be at least equal to that benefit.

5.Where an act or omission of a ESG rating provider constitutes more than one infringement to this Regulation, only the higher fine calculated in accordance with paragraph 2 and relating to one of those infringements shall apply.

Article 35 - Periodic penalty payments

1.ESMA shall, by decision, impose periodic penalty payments to compel:

(a)an ESG ratings provider to put an end to an infringement in accordance with a decision taken pursuant to Article 33;

(b)the persons referred to in Article 30(1):

(1)to supply complete information which has been requested by a decision taken pursuant to Article 30;

(2)to submit to an investigation and in particular to produce complete records, data, procedures or any other material required and to complete and correct other information provided in an investigation launched by a decision taken pursuant to Article 30;

(3)to submit to an on-site inspection ordered by a decision taken pursuant to Article 32.

2.A periodic penalty payment shall be effective and proportionate. ESMA shall impose the periodic penalty payment on a daily basis until the ESG rating provider or person concerned complies with the relevant decision referred to in paragraph 1.

3.Notwithstanding paragraph 2, the amount of the periodic penalty payments shall be 3 % of the average daily turnover in the preceding business year, or, in the case of natural persons, 2 % of the average daily income in the preceding calendar year. It shall be calculated from the date stipulated in the decision imposing the periodic penalty payment.

4.A periodic penalty payment shall be imposed for a maximum period of six months following the notification of ESMA’s decision. Following the end of that period, ESMA shall review the measure.

Article 36 - Disclosure, nature, enforcement and allocation of fines and periodic penalty payments

1.ESMA shall disclose to the public every fine and every periodic penalty payment that it has imposed pursuant to Articles 34 and 35, unless such disclosure to the public would seriously jeopardise the Union financial markets or cause disproportionate damage to the parties involved. Such disclosure shall not contain personal data within the meaning of Regulation (EU) 2018/1725 of the European Parliament and of the Council 54 .

2.Fines and periodic penalty payments imposed pursuant to Articles 34 and 35 shall be of an administrative nature.

3.Fines and periodic penalty payments imposed pursuant to Articles 34 and 35 shall be enforceable.

Enforcement of the fines and periodic payments shall be governed by the rules of procedure in force in the Member State or third country in which it is carried out.

4.The fines and periodic penalty payments shall be allocated to the general budget of the European Union.

Section 3 - Procedures and review


Article 37 - Procedural rules for taking supervisory measures and imposing fines

1.Where ESMA finds that there are serious indications of a possible infringement of this Regulation, ESMA shall appoint an independent investigation officer within ESMA to investigate the matter. That appointed officer shall not be involved or have been directly or indirectly involved in the supervision of the ESG ratings to which the infringement relates and shall perform his or her functions independently from ESMA’s Board of Supervisors.

2.The investigation officer referred to in paragraph 1 shall investigate the alleged infringements, take into account any comments submitted by the persons who are subject to the investigation, and shall submit a complete file with his or her findings to ESMA’s Board of Supervisors.

3.The investigation officer shall have the power to request information in accordance with Article 30 and to conduct investigations and on-site inspections in accordance with Articles 31 and 32.

4.When carrying out his or her tasks, the investigation officer shall have access to all documents and information that have been gathered by ESMA in its supervisory activities.

5.The rights of defence of the persons subject to the investigation shall be fully respected during investigations under this Article.

6.Upon submission of the file with his or her findings to ESMA’s Board of Supervisors, the investigation officer shall notify the persons who are subject to the investigation.

7.On the basis of the file containing the investigation officer’s findings and, where requested by the persons concerned after having heard those persons in accordance with Article 38, the Board of Supervisors of ESMA shall assess whether one or more persons subject to the investigation have committed the infringements concerned and shall, where it comes to the conclusion that such infringements have been committed, take a supervisory measure as referred to in Article 33 and impose a fine in accordance with Article 34.

8.The investigation officer shall not participate in the deliberations of ESMA’s Board of Supervisors or in any other way intervene in the decision-making process of ESMA’s Board of Supervisors.

9.The Commission shall supplement this Regulation by adopting further rules of procedure for the exercise of ESMA’s power to impose fines or periodic penalty payments, including provisions on rights of defence, temporal provisions, and the collection of fines or periodic penalty payments, and by adopting detailed rules on the limitation periods for the imposition and enforcement of penalties.

The rules referred to in the first subparagraph shall be adopted by means of delegated acts in accordance with Article 45.

10.ESMA shall refer matters for criminal prosecution to the national authorities concerned where, in carrying out its tasks under this Regulation, it finds that there are serious indications of the possible existence of facts liable to constitute criminal offences. ESMA shall refrain from imposing fines or periodic penalty payments where a prior acquittal or conviction arising from an identical fact or facts which are substantially the same has already acquired the force of res judicata as the result of criminal proceedings under national law.

Article 38 - Hearing of the persons subject to investigations

1.Before taking any decision pursuant to Article 33, 34 and 35, ESMA shall give the persons subject to the proceedings the opportunity to be heard on its findings. ESMA shall base its decisions only on findings on which the persons subject to the proceedings have had an opportunity to comment.

The first subparagraph shall not apply where urgent action pursuant to Article 33 is needed to prevent significant and imminent damage to the financial system. In such a case, ESMA may adopt an interim decision and shall give the persons concerned the opportunity to be heard as soon as possible after taking its decision.

2.The rights of defence of the persons subject to the proceedings shall be fully respected in the investigations. They shall be entitled to have access to ESMA’s file, subject to the legitimate interest of other persons in the protection of their business secrets. The right of access to the file shall not extend to confidential information or ESMA’s internal preparatory documents.

Article 39 - Review by the Court of Justice

The Court of Justice shall have unlimited jurisdiction to review decisions whereby ESMA has imposed a fine or a periodic penalty payment. It may annul, reduce, or increase the fine or periodic penalty payment imposed.

Section 4 - Fees and delegation


Article 40 - Supervisory fees

1.ESMA shall charge fees to the ESG rating providers in accordance with the delegated act adopted pursuant to paragraph 2. Those fees shall fully cover ESMA’s necessary expenditure relating to the supervision of ESG rating providers and the reimbursement of any costs that the competent authorities may incur carrying out work pursuant to this Regulation, and in particular as a result of any delegation of tasks in accordance with Article 41.

2.The amount of an individual fee shall be proportionate to the annual net turnover of the ESG ratings provider concerned.

By XX XXXX XXXX, the Commission shall adopt delegated acts in accordance with Article  45 to supplement this Regulation by specifying the type of fees, the matters for which fees are due, the amount of the fees, the manner in which they are to be paid and, where applicable, the way in which ESMA is to reimburse competent authorities in respect of any costs that they may have incurred carrying out work pursuant to this Regulation, in particular as a result of any delegation of tasks as referred to in Article 41.

CHAPTER 5 - Cooperation between ESMA and national competent authorities

Article 41 - Delegation of tasks by ESMA to competent authorities

1.Where necessary for the proper performance of a supervisory task, ESMA may delegate specific supervisory tasks to the competent authority of a Member State in accordance with the guidelines issued by ESMA pursuant to Article 16 of Regulation (EU) No 1095/2010. Such specific supervisory tasks may, in particular, include the power to carry out requests for information in accordance with Article 30 and to conduct investigations and on-site inspections in accordance with Article 31 and Article 32.

2.Prior to the delegation of a task in accordance with paragraph 1, ESMA shall consult the relevant competent authority about:

(a)the scope of the task to be delegated;

(b)the timetable for the performance of the task;

(c)the transmission of necessary information by and to ESMA.

3.ESMA shall reimburse a competent authority for costs incurred as a result of carrying out delegated tasks in accordance with the delegated act adopted pursuant to Article 45.

4.ESMA shall review any delegation made in accordance with paragraph 1 at appropriate intervals. ESMA may revoke a delegation at any time.

5.A delegation of tasks shall not affect the responsibility of ESMA nor limit ESMA’s ability to conduct and oversee the delegated activity. ESMA shall not delegate supervisory responsibilities, including authorisation decisions, final assessments and follow-up decisions concerning infringements.

Article 42 - Exchange of information

ESMA and the competent authorities, shall, without undue delay, provide each other with the information required for carrying out their duties under this Regulation.

Article 43 - Notifications and suspension requests by competent authorities

1.A competent authority of a Member State that finds that acts infringing this Regulation are being, or have been, carried out on the territory of its own or of another Member State shall inform ESMA thereof. A competent authority that considers it appropriate for investigatory purposes may suggest to ESMA that it assesses the need to use the powers under Article 30 in relation to the ESG rating provider involved in those acts.

2.ESMA shall take appropriate action. ESMA shall inform the notifying competent authority of the outcome and, as far as possible, of any significant interim developments.

3.A notifying competent authority of a Member State that considers that an ESG rating provider that is listed in the register referred to in Article 13 and whose ESG ratings are used within the territory of that Member State has infringed this Regulation in such a way that the protection of investors or the stability of the financial system in that Member State are significantly impacted, may request ESMA to suspend the provision of ESG ratings by the ESG rating provider concerned. The notifying competent authority shall provide ESMA with full reasons for its request.

4.Where ESMA considers that the request referred to in paragraph 3 is not justified, it shall inform the notifying competent authority thereof in writing, setting out the reasons for its opinion. Where ESMA considers that the request is justified, it shall take the measures appropriate to resolve the issue.

Article 44 - Professional secrecy

1.The obligation of professional secrecy shall apply to ESMA, the competent authorities, and all persons who work or who have worked for ESMA, for the competent authorities or for any other person to whom ESMA has delegated tasks, including auditors and experts contracted by ESMA.

2. All the information exchanged under this Regulation between ESMA, the competent authorities, the EBA, EIOPA and the ESRB shall be considered confidential, except:

(a)where ESMA or the competent authority or another authority or body concerned states at the time of communication that such information may be disclosed;

(b)where disclosure is necessary for legal proceedings;

(c)where the information disclosed is used in a summary or in an aggregate form in which individual financial market participants cannot be identified.

TITLE IV - DELEGATED AND IMPLEMENTING ACTS

Article 45 - Exercise and revocation of the delegation and objections to delegated acts

1.The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.The power to adopt delegated acts referred to in Articles 5, 21, 22 and 40 shall be conferred on the Commission for an indeterminate period of time from [PO: Please insert date of entry into force].

3.The delegation of power referred to in Articles 5, 21, 22 and 40 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4.Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Inter-institutional Agreement of 13 April 2016 on Better Law-Making.

5.As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

6.A delegated act adopted pursuant to Articles 7, 33, 34 and 40 shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by [two months] at the initiative of the European Parliament or of the Council.

7.If, on expiry of the period referred to in paragraph 6, neither the European Parliament nor the Council has objected to the delegated act, it shall be published in the Official Journal of the European Union and shall enter into force on the date stated therein. The delegated act may be published in the Official Journal of the European Union and enter into force before the expiry of that period if the European Parliament and the Council have both informed the Commission of their intention not to raise objections.

8.If either the European Parliament or the Council objects to the delegated act within the period referred to in paragraph 1, it shall not enter into force. In accordance with Article 296 of the Treaty on the Functioning of the European Union, the institution which objects shall state the reasons for objecting to the delegated act.

Article 46 - Amendments to Annexes

To take account of developments, including international developments, on financial markets, in particular in relation to sustainable finance, the Commission may adopt, by means of delegated acts in accordance with Article 45, measures to amend the Annexes.

Article 47 - Committee procedure

1.The Commission shall be assisted by the European Securities Committee established by Commission Decision 2001/528/EC 55 . That committee shall be a committee within the meaning of Regulation (EU) No 182/2011 of the European Parliament and of the Council. 56

2.Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

TITLE V - TRANSITIONAL AND FINAL PROVISIONS

Article 48 - Transitional provisions

1.ESG rating providers which provided their services at the date of entry into force of this Regulation shall notify ESMA within 3 months if they want to continue offering their services and apply for authorisation in accordance with Article 5. In that case, they shall apply for authorisation within 6 months after the date of application of this Regulation.

2.By way of derogation of the first paragraph, ESG rating providers categorized as small and medium-sized undertaking under Article 3 of the Directive 2013/34/EU shall apply for authorisation within 24 months after the date of application of this Regulation.

3.ESG rating providers categorized as small and medium-sized undertaking under Article 3 of Directive 2013/34/EU entering the market after [please insert the date of entry into application] shall notify ESMA prior to starting offering their services and shall apply for authorisation within 12 months of that notification.

Article 49 - Review

1.The Commission shall evaluate the application of this Regulation by [five years after the entry into force of this Regulation]. 

2.The Commission shall present a report on the main findings of the evaluation to the European Parliament and the Council. In carrying out the evaluation, the Commission shall take into account market developments and the relevant evidence at its disposal.

3.Where the Commission finds it appropriate, the report shall be accompanied by a legislative proposal for amendment of relevant provisions of this Regulation.

Article 50 - Entry into force and application

This Regulation shall enter into force on the 20th day following that of its publication in the Official Journal of the European Union.

It shall apply from [6 months after the entry into force of this Regulation].

This Regulation shall be binding in its entirety and directly applicable in all Member States.