The European Council has adopted new regulatory rules for ESG ratings providers, marking the final major legislative step in a process that began with ESMA's concerns about the unregulated status of the sector in 2021. The legislation, which will take effect 18 months after its publication in the EU's Official Journal, requires ESG ratings providers to be authorized and supervised by ESMA, ensuring transparency in their methodologies and information sources. Rating providers must prevent conflicts of interest and maintain rigorous methodologies, while non-EU providers must either obtain endorsement from an EU-authorized ESG rating provider, gain recognition based on quantitative criteria, or be included in the EU registry through an equivalence decision.
