Changes from report parliamentary committee draft to plenary report

Added(kc) if an ESG rating provider chooses to cover the S factor in its ESG rating, information on whether that rating considers the compliance of the rated entity with International Labour Organisation core conventions on Right to Organise and Collective Bargaining;

Added(kd) if an ESG rating provider chooses to cover the G factor in its ESG rating, whether the rated entity considers the alignment with international standard on tax evasion and avoidance;

Added(ke) any limitation on the information available to ESG rating providers.

Added2. Additional disclosures to users of ESG rating and rated undertakings in scope of Directive 2013/34/EU

AddedIn addition to the elements referred to in Article 22 of the Regulation, ESG rating providers and, where relevant, ESG rating subscribers shall make available the following information to European regulated financial undertakings and to undertakings in the scope of Directive 2013/34/EU that are subject of such rating:

Added(a) a more granular overview of the rating methodologies used (and changes thereto), including:

Added(1) where applicable, scientific evidence and assumptions on which the ratings are based,

Added(2) whether the analysis is backward-looking or forward-looking and the time horizon covered,

Added(2a) whether the analysis looks at potential material financial risk to the rated entity, or potential material impact of the rated entity on the environment and on society in general, or both,

Added(2b) the industry classification used for the rated undertaking and why this classification is relevant,

Added▐(4) the relevant KPIs per E, S and G factor, and weighting method,

Added(4a) in the case of an aggregated ESG rating, the result of the assessment for each ESG factor category, each assessment result being based on a same scale, to ensure comparability of the E, S and G category,

Added(5) any potential shortcomings of methodologies,

Added(6) policies for the revision of methodologies,

Added(6a) any changes to rating methodologies, models, key rating assumptions or data sources (including estimates), reasons for these changes and their implications on ratings,

Added(7) last date of the revision,

Added(7a) timing of data used for evaluation,

Added(7b) any errors in its ESG rating methodologies or in their application, including the measures taken once errors have been identified,

Added(7c) where the ESG rating includes KPIs covering the E factor, the extent to which the ESG rating is correlated with the percentage of taxonomy-alignment under Regulation (EU) 2020/852, together with an explanation of any significant deviations therefrom.

Added(b) a more granular overview of data processes, including:

Added(1) more detailed explanation of data sources used – including whether public or non-public, mentioning whether derived from the sustainability reporting standards developed pursuant to Article 29b of Directive 2013/34/EU /Taxonomy/SFDR],

Added(2) where applicable the use of proxies or industry average and explanation of the underlying methodology,

Added(3) the policies for updating data and revising historical data, date of last updates of data,

Added(4) data quality controls,

Added(5) any steps taken to address limitations in data sources, where applicable,

Added(5a) whether the data used has been subject to an assurance review;

Added(c) ▐information about engagement with rated entities including whether on-site reviews or inspections have been performed by the ESG rating provider and at what frequency;

Added(ca) a statement on the limitations of the ratings, including information about engagement with the various stakeholders of a rated entity and how contradictory, incomplete or subjective information is handled;

Added(d) where applicable, an explanation of any AI methodology used in the data collection or rating process;

Added(e) in case of a major new information on a rated entity that has the possibility to affect the result of an ESG rating, ESG rating providers shall inform how they have taken that information into account and whether they have amended the corresponding ESG rating.

AddedThe information referred to in Part 2 of this Annex shall be specific to each ESG rating distributed.