36 Amendments of Billy KELLEHER related to 2023/0177(COD)
Amendment 114 #
Proposal for a regulation
Recital 10
Recital 10
(10) ESG ratings play an important role in global capital markets, as investors, borrowers and issuers increasingly use those ESG ratings as part of making informed, sustainable investment and financing decisions. Credit institutions, investment firms, insurance undertakings, assurance undertakings, and reinsurance undertakings, amongst others, often use those ESG ratings as a reference for the sustainability performance or for the sustainability risks and opportunities in their investment activity. Consequently, ESG ratings have a significant impact on the operation of the markets and on the trust and confidence of investors and consumers. To ensure that ESG ratings used in the Union are independent, objective and of adequate quality, it is important that ESG rating activities are conducted in accordance with the principles of integrity, transparency, responsibility, and good governance. Better comparability and increased reliability of ESG ratings would enhance the efficiency of that fast-growing market, thereby facilitating progress towards the objectives of the Green Deal. (This amendment applies throughout the text in the context of describing the desired characteristics of ESG ratings.)
Amendment 116 #
Proposal for a regulation
Recital 12 a (new)
Recital 12 a (new)
(12 a) Aside from their use in the financial services sector, ESG rating assessments are also used in the procurement and supply chain context. Therefore, ESMA should take account of the distinction between ESG ratings providers in the financial sectors and non-financial sectors in its supervision of ESG rating providers.
Amendment 128 #
Proposal for a regulation
Recital 17
Recital 17
(17) Given the use of ESG ratings from providers located outside the Union, it is necessary to introduce requirements based on which third-country ESG rating providers may offer their services in the Union. This is necessary to ensure market integrity, investor protection and proper enforcement. There are objective reasons why a third country ESG rating provider has to provide the ESG rating and why that ESG rating should be endorsed for use in the Union, including proximity to the issuer, a particular industry, centres of excellence for sub-components of ESG factors, expertise of staff employed outside the EU, and the development of ratings through the collaboration of global teams . Therefore, three possible regimes are proposed for those third countries ESG rating providers: equivalence, endorsement and recognition. As an overarching principle, supervision and regulation in a third country should be equivalent to Union supervision and regulation of ESG ratings. Therefore, ESG ratings provided by an ESG rating provider located in a third country can only be offered in the Union where a positive decision on equivalence of the third- country regime has been taken by the Commission. However, to avoid any adverse impact resulting from a possible abrupt cessation of the offering in the Union of ESG ratings provided by a third country ESG rating provider, it is also necessary to provide for certain other mechanisms, that is endorsement and recognition. Any ESG rating provider with a group structure should be able to use the mechanism of endorsement for the ESG ratings developed outside the Union, provided they establish, within the group, an authorised ESG rating provider in the Union. Smaller ESG rating providers, within the meaning of the maximum threshold of net turnover in the Union to define small undertakings in Directive 2013/34/EU26 , that generally do not belong to a group, and may not have the means to have a legal entity authorised in the Union, should be able to continue or start offering their services in the Union and should therefore benefit from a lighter regime, that is recognition. Where the third country ESG provider is subject to supervision, appropriate cooperation arrangements should be put in place in order to ensure the proper exchange of information with the relevant competent authority of the third country. _________________ 26 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).
Amendment 132 #
Proposal for a regulation
Recital 20
Recital 20
(20) To ensure the quality and reliability of ESG ratings, ESG rating providers should use rating methodologies that are rigorous, systematic, objectiveindependent, continuous and subject to validjustification. ESG rating providers should review ESG ratings methodologies on an on-going basis and at least annually.
Amendment 135 #
Proposal for a regulation
Recital 21
Recital 21
(21) To ensure a higher-level transparency, ESG rating providers should disclose information to the public on the methodologies, models and key rating assumptions which those providers use in their ESG rating activities and in each of their ESG ratings product. In light of the uses of ESG ratings by investors, the rating products should explicitly disclose which dimension of the double materiality the rating addresses, whether it is both material financial risk to the rated entity and the material impact of the rated entity on the environment and society in general or whether it takes into account only one of them. They should also explicitly disclose whether the rating addresses other dimensions. For the same reason, ESG rating providers should provide more detailed information on the methodologies, models and key rating assumptions to subscribers of ESG ratings. That information should enable users of ESG ratings to perform their own due diligence when assessing whether to rely or not on those ESG ratings. In particular, ESG ratings providers should disclose whether E, S, or G factors are taken into account, or an aggregation thereof, the rating given to each relevant factor, and the weighting each of these factors is given in the aggregation. Disclosure of information concerning models should however not reveal sensitive business information or impede innovation.
Amendment 139 #
Proposal for a regulation
Recital 21 a (new)
Recital 21 a (new)
(21 a) This Regulation should not interfere with the ESG rating methodologies or content. Diversity in the methodologies of ESG ratings providers ensures that the broad requirements of users can be met and promotes competition in the market.
Amendment 148 #
Proposal for a regulation
Article 1 a (new)
Article 1 a (new)
Article1a Use of an ESG rating A regulated financial undertaking may use an ESG rating or a combination of ESG ratings in the Union if the ESG rating is provided by an ESG rating provider included in the register referred to in Article 13 or if it has developed the ESG rating exclusively for in-house use.
Amendment 155 #
(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 and that are not used in external marketing of products or advice issued by the financial undertakings;
Amendment 159 #
Proposal for a regulation
Article 2 – paragraph 2 – point b a (new)
Article 2 – paragraph 2 – point b a (new)
(ba) ESG scores or factors that are produced as part of and incorportated into the public methodologies for credit ratings and are not marketed independently;
Amendment 162 #
Proposal for a regulation
Article 2 – paragraph 2 – point c
Article 2 – paragraph 2 – point c
(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;
Amendment 174 #
Proposal for a regulation
Article 2 – paragraph 2 – point f
Article 2 – paragraph 2 – point f
(f) second-party opinions on sustainability bondle debt instruments, including but not limited to sustainability bonds, loans and other types of debt instruments, as well as financing frameworks that govern the use of such instruments;
Amendment 176 #
Proposal for a regulation
Article 2 – paragraph 2 – point h
Article 2 – paragraph 2 – point h
(h) ESG ratings from an authorised ESG rating provider that are made available to users by a third party or an affiliate of the authorised ESG rating provider within the same group structure;
Amendment 197 #
Proposal for a regulation
Article 3 – paragraph 1 – point 1
Article 3 – paragraph 1 – point 1
(1) ‘ESG rating’ means a product marketed as providing an opinion, a score or a combination of both, or the analysis or modelling of data 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 andor 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’;
Amendment 211 #
Proposal for a regulation
Article 3 – paragraph 1 – point 4
Article 3 – paragraph 1 – point 4
(4) ‘ESG rating providers’ means a legal person whose occupation includes the offering and distributionissuance of ESG ratings or scores on a professional basis;
Amendment 242 #
Proposal for a regulation
Article 8 – paragraph 2 a (new)
Article 8 – paragraph 2 a (new)
2a. In the event of a withdrawal or suspension on the basis of the cases listed in points (b)-(d) of paragraph 1, ESMA shall publish the decision on its website.
Amendment 281 #
Proposal for a regulation
Article 11 – paragraph 1
Article 11 – paragraph 1
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 in the Union 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.
Amendment 294 #
Proposal for a regulation
Article 14 – paragraph 7
Article 14 – paragraph 7
7. ESG rating providers shall use rating methodologies for the ESG ratings they provide that are rigorous, systematic, objectiveindependent and capable of validjustification and shall apply those rating methodologies continuously.
Amendment 317 #
Proposal for a regulation
Article 15 – paragraph 1 – point b
Article 15 – paragraph 1 – point b
(b) the issuance and saledistribution of credit ratings;
Amendment 321 #
Proposal for a regulation
Article 15 – paragraph 1 – point c
Article 15 – paragraph 1 – point c
(c) the development of benchmarks by 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;
Amendment 335 #
Proposal for a regulation
Article 16 – paragraph 1
Article 16 – paragraph 1
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, in particular a sufficient understanding of potential material financial risk to the rated entity and potential material impact of the rated entity on the environment and society in general.
Amendment 340 #
Proposal for a regulation
Article 16 – paragraph 7
Article 16 – paragraph 7
7. Where a rating analyst terminates his or her employment with the ESG rating provider and, within one year, 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.
Amendment 352 #
Proposal for a regulation
Article 18 – paragraph 2 – point a – point 4
Article 18 – paragraph 2 – point a – point 4
Amendment 377 #
Proposal for a regulation
Article 21 – paragraph 1
Article 21 – paragraph 1
1. ESG rating providers shall disclose, as a minimum, 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.
Amendment 384 #
Proposal for a regulation
Article 21 – paragraph 3 a (new)
Article 21 – paragraph 3 a (new)
3 a. ESMA shall develop draft implementing technical standards to specify the data standards and formats for the elements that are to be disclosed in accordance with paragraph 1. ESMA shall submit those draft implementing technical standards to the Commission by XX XXXX XXXX.
Amendment 390 #
Proposal for a regulation
Article 22 – paragraph 3 a (new)
Article 22 – paragraph 3 a (new)
3 a. ESMA shall develop draft implementing technical standards to specify the data standards and formats for the elements that are to be disclosed in accordance with paragraph 1. ESMA shall submit those draft implementing technical standards to the Commission by XX XXXX XXXX.
Amendment 398 #
Proposal for a regulation
Article 23 – paragraph 3 – subparagraph 1
Article 23 – paragraph 3 – subparagraph 1
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.
Amendment 410 #
Proposal for a regulation
Article 25 – paragraph 1
Article 25 – paragraph 1
1. ESG rating providers shall take steps that are adequate to ensure that fees charged to clients are fair, reasonable, transparent, and non-discriminatory and are based on costs.
Amendment 462 #
Proposal for a regulation
Article 49 – paragraph 2
Article 49 – paragraph 2
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. In particular, the Commission shall consider:
Amendment 463 #
Proposal for a regulation
Article 49 – paragraph 2 – point i (new)
Article 49 – paragraph 2 – point i (new)
(i) whether the framework facilitates the comparability of ESG ratings; and,
Amendment 464 #
Proposal for a regulation
Article 49 – paragraph 2 – point ii (new)
Article 49 – paragraph 2 – point ii (new)
(ii) whether ESG data providers should be subject to transparency and conflict of interest requirements.
Amendment 472 #
Proposal for a regulation
Annex I – paragraph 1 – point i a (new)
Annex I – paragraph 1 – point i a (new)
(ia) where applicable, the ESG ratings provided by a third country ESG rating provider belonging to the same group that the ESG ratings provider expects to endorse;
Amendment 479 #
Proposal for a regulation
Annex III – Part 1 – paragraph 1 – point a
Annex III – Part 1 – paragraph 1 – point a
(a) high level overview of the rating methodologies used (and changes thereto), including: (i) whether analysis is backward- looking or forward-looking; and, (ii) whether the analysis looks at potential material financial risk to the rated entity, or potential material impact of the rated entity on the environment and society in general, or both, the weighting of the two factors, and the explanation of the weighting method, including weight per factor;
Amendment 483 #
Proposal for a regulation
Annex III – Part 1 – paragraph 1 – point b
Annex III – Part 1 – paragraph 1 – point b
(b) high level overview of data processes (data sources, including if they are public or non–public, and if they are sourced from sustainability statements required by Directive (EU) 2022/2464 and Regulation (EU) 2019/2088, estimation of input data in case of unavailability, frequency of data updates);
Amendment 492 #
Proposal for a regulation
Annex III – Part 1 – paragraph 1 – point f
Annex III – Part 1 – paragraph 1 – point f
(f) in the case of an aggregated ESG rating, the rating given to the individual E, S and G factors, the weighting of the three overarching ESG factors categories (e.g., 33% Environment, 33% Social, 33% Governance), and the explanation of the weighting method, including weight per individual E, S and G factors;
Amendment 499 #
Proposal for a regulation
Annex III – Part 1 – paragraph 1 – point k a (new)
Annex III – Part 1 – paragraph 1 – point k a (new)
(ka) any revisions of the rating of a rated entity and the factors contributing to this revision.
Amendment 503 #
Proposal for a regulation
Annex III – Part 2 – paragraph 1 – point a – point 2 a (new)
Annex III – Part 2 – paragraph 1 – point a – point 2 a (new)
(2a) whether the analysis looks at potential material financial risk to the rated entity, or potential material impact of the rated entity on the environment and society in general, or both, the weighting of the two factors, and the explanation of the weighting method, including weight per factor;