ESMA Finds Divergence in ESG Disclosures in Credit Ratings


The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, publishes an article assessing the implementation of ESMA’s Guidelines on the disclosure of environmental, social, and governance (ESG) factors in credit rating agency (CRA) press releases. ESMA finds that the overall level of disclosures has increased since the introduction of the Guidelines, but that a high level of divergence across CRAs means there is still room for further improvement.

Applying national language processing techniques to a unique dataset of over 64,000 CRA press releases published between 1 January and 30 December 2020, the study finds that the extent of ESG disclosures differs significantly across both CRAs and ESG factors, especially environmental topics. It also observes divergences in CRAs’ disclosures even for rated entities that are highly exposed to ESG factors, relative to their sector peers. Investor interest in sustainable finance has grown exponentially in recent years and, as a result, some CRAs have sought to become more transparent on how ESG factors are integrated into their credit ratings.

ESMA, to ensure a consistent level of ESG issues transparency for investors, on 30 March 2020 began applying Guidelines for how and when CRAs’ considerations of ESG factors are disclosed in credit rating press releases.

ESMA is also currently conducting a Call for Evidence on the market structure of ESG rating providers in the EU. Its purpose is to develop a picture of the size, structure, resourcing, revenues and product offerings of the different ESG rating providers operating in the EU.


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