SMSG response to consultation paper on ESG Ratings RTS

What's new?

On 25 June 2025, the Securities and Markets Stakeholder Group (SMSG) published its advice to ESMA in response to the consultation paper (the CP) on draft regulatory technical standards (RTS) under the ESG Ratings Regulation (the Regulation).

The Regulation was published in the Official Journal on 12 December 2024 and will apply from 02 July 2026. For more information, see our client note here.

What does the SMSG's advice say?

The SMSG welcomes the simplification approach taken by ESMA in the CP but puts forward suggestions for improvement and clarification in several key areas of the draft RTS.

Information requirements

The SMSG questions the usefulness of requiring detailed information regarding ESG analysts employed by ESG rating providers, as this could place 'undue pressure on the individual analysts' to assign more favourable ratings. The SMSG therefore seeks further guidance about the frequency and public availability of such information.

SMEs and start-ups in the rating sector

The SMSG notes the need for further clarity on how the rules apply to SMEs and start-ups.

It considers the current draft to imply that ESG rating providers already have established operations, leaving little room for new entrants in the early stages of development.

Methodology

The SMSG questions the ambiguous use of 'scientific methodology', noting the risk of misuse in cases where no such methodology exists. It also seeks clarity on the requirements for 'updates' or 'changes' to methodologies, for example, establishing a threshold for updates or changes.

It also notes that users of ESG ratings may be interested in understanding the weight an ESG provider assigns to certain factors and data, so that users can incorporate this into their own use of the ratings.

Relationship with rated companies

The SMSG notes concerns from rated companies about the lack of communication from ESG rating providers and the failure to correct inaccurate information. As a result, it recommends improving data-verification and methodological transparency in order to strengthen the reliability and impartiality of ESG ratings.

Outsourcing

The SMSG mentions the lack of clarity on the applicability of rules to outsourcing arrangements and requests further guidance to ensure consistent practices among ESG rating providers.

Interaction with other regulatory frameworks

The SMSG explains that there are several ongoing reviews of other ESG-related frameworks, such as the Corporate Sustainability Reporting Directive (CSRD), and would like further clarity on how these reviews may impact the Regulation and the forthcoming RTS.

Next Steps

ESMA will consider the SMSG's advice as it finalises the draft RTS.

It must submit a final report, containing draft RTS, to the Commission by 2 October 2025.