ESG ratings providers must stop providing consulting services to investors, stop the sale of credit ratings and the development of benchmarks among other things, according to the EU's draft legislation published on Tuesday.
"ESG ratings agencies that score companies on governance factors are completely unregulated so it's very difficult to compare ratings by different agencies.
Agencies providing ESG ratings include S&P Global (SPGI.N), Moody's (MCO.N), MSCI (MSCI.N)> and Morningstar's (MORN.O) Sustainalytics.
Britain has also outlined plans to regulate ESG ratings providers where the rating is used by anyone in the UK.
In March, the finance ministry published a consultation on regulating ESG ratings providers, saying it saw a "clear benefit" from improving the transparency of methodologies as well as rating providers' governance and processes.
Persons:
Mairead McGuinness, Markus Ferber, Ferber, Julia Payne, Tommy Reggiori Wilkes, Sinead Cruise, Mark Potter, Ed Osmond
Organizations:
European, European Securities and Markets Authority, Financial Services, P, Global, Morningstar, Conservative European, European Commission, Thomson
Locations:
EU, BRUSSELS, LONDON, Britain, Europe