ESG Ratings
ESG Ratings
The ESG Ratings Regulation – a legal framework for ESG Ratings
A European legal framework has been created for ESG ratings that is intended to improve transparency, comparability and quality of ESG (Environment, Social, Governance) ratings by means of the ESG Ratings Regulation Regulation (EU) 2024/3005. The Regulation applies directly in all EU member states from 02 July 2026.
Its objective is a harmonised framework for ESG rating providers. It is intended to improve the quality and comprehensibility of ESG ratings for market participants and issuers. The Regulation contains requirements regarding the organisational structure, methodology and disclosure regarding ESG ratings and ESG rating providers.
At the same time, the ESG Ratings Regulation Enforcement Act (ESG-Rating-Verordnung-Vollzugsgesetz) and an amendment to the Financial Market Authority Act (FMABG; Finanzmarktaufsichtsbehördengesetz) also enter into force; both of these items were announced in Federal Law Gazette I No. 28/2026 (in German only). The respective relevant responsibilities of the European Securities and Markets Authority (ESMA) and the FMA are determined in these legal acts. ESMA is responsible for the direct supervision of ESG rating providers, with the FMA active in a supporting capacity. Further information about the respective legal bases about Sustainable Finance and the ESG Ratings Regulation may be found here: Legal Bases regarding Sustainable Finance)
For whom is the ESG Ratings Regulation applicable?
The Regulation addresses entities that issue and publish or distribute ESG ratings in the European Union on a professional basis. The term ESG ratings covers the ratings of environmental, social and governance characteristics or risks that are based on a defined methodology and made available to third parties. Special requirements apply for financial undertakings that are already regulated, that provide ESG ratings and disclose them for marketing purposes. In this case they are not considered to be ESG rating providers, but are required to make the information required in accordance with Annex I point 1 of the ESG Ratings Regulation available on their website.
What needs to be borne in mind after 02 July 2026?
Following the transposition of the ESG Ratings Regulation, ESG ratings are only allowed to be issued by ESG rating providers in the EU that have a permissible status under supervisory law. For providers established in the EU, this requires an ESMA authorisation.
ESG rating providers already active in the EU are required to notify ESMA by 02 August 2026 at the latest, about whether they will continue their EU activity and that they want to apply for an authorisation. In this case, they are required to apply for an authorisation by 02 November 2026. If they submit their notification on time, ESG rating providers that are already active may continue to be active until an ESMA decision is issued.
Small ESG rating providers may make use of a three-year transitional rule. They are required to register with ESMA rather than undergoing a full authorisation procedure immediately.
Application for authorisation and registration with ESMA
Applications for authorisation and registration are to be submitted to ESMA. Further information, the relevant deadlines, the required documents as well as a precise description for small ESG rating providers can be found here: https://www.esma.europa.eu/esmas-activities/investors-and-issuers/esg-rating-providers.
The FMA, in its capacity as the national point of contact, may be contacted at: [email protected] for issues about the ESG Ratings Regulation.