ESG regulations are government standards for ESG-related actions, reporting or disclosures. While the ESG space is mostly unregulated, various legal requirements have already passed in some jurisdictions, with the EU leading in this regard, but implemented at different paces. Some businesses may already be undertaking ESG reporting and disclosures, depending on their size and industry.
With the regulation on environmental, social and governance (ESG) rating provider activities, the EU is the first jurisdiction in the world to move to regulate the ESG rating market. While credit ratings assess the default risk of a company, which can be influenced by ESG factors and other risks through various issues, ESG ratings assess the “sustainability” of companies. On 5 February 2024, the European Union (EU) published a draft proposal (Draft Proposal) for the regulation of ESG ratings.
