The Autorité des marchés financiers (AMF) and its Dutch counterpart, the Autoriteit Financiële Markten (AFM), have proposed a European regulatory framework for providers of sustainability-related services.
The French and Dutch financial market authorities suggested the framework could become one of the key measures of the European Commission's renewed sustainable finance strategy.
The proposed framework is aimed at preventing misallocation of investments, greenwashing, and ensuring investor protection.
It includes requirements on transparency on methodologies, management of conflicts of interest, internal control processes, and enhanced dialogue with companies subject to sustainability ratings.
According to AMF and AFM, fostering the green transition in Europe will require significant investment over the coming years.
The European Green Deal estimates that €260 billion needs to be mobilised annually by 2030.
The influence of environmental, social and governance (ESG) factors on the investment decisions of retail investors and asset managers is “substantial and likely to grow”, the French and Dutch financial market authorities explained.
It highlighted that increasing regulation on sustainable finance fuels the demand for ESG data by investors.
Laura van Geest, chair of the Dutch Authority Financial markets, commented: "We believe providers of sustainablity-related services play a crucial role for investors in the market for sustainable finance. Many investors depend on them in their investment decisions. Introducing minimum transparency and organisational requirements should greatly benefit this key part of the sustainable finance ecosystem.”
“This joint AMF/AFM position paper aims at contributing to the debate on what regulation of ESG rating and data services providers should look like. We would like to invite regulators, market players and other stakeholders to add their perspectives to this debate”, she explained.
Robert Ophèle, chair of the AMF, added: “The sustainable investment market is growing rapidly, but its credibility depends largely on the quality and reliability of the ESG information used. It is with this objective in mind and to ensure investor confidence that we wish to propose with the AFM a European regulatory framework for ESG data and service providers. The construction of such a regulation should be put on the agenda of the renewed sustainable finance strategy and conducted collectively.”
