The European Union on Tuesday proposed new regulations for firms selling environmental, social and governance (ESG) ratings that could force some to restructure their businesses in a major shake-up of the industry.
Sustainalytics are among the biggest sellers of ratings on companies' ESG performance that help guide trillions of investment dollars.
The rules could force agencies to separate their businesses, although it was not immediately clear what changes companies would need to make to be regarded as operating independently. "The proposal introduces greater transparency in the market, without prescribing ESG assessment methodologies, contributing to more effective allocation of capital to sustainable investment activities," it said.
Global sustainable assets under management stood at $2.74 trillion in March, Morningstar estimates. Much of that is in funds which track indexes comprised of companies awarded certain ESG rankings, or which exclude those firms ranked lowly.
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