Final Report on Technical Standards under the Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities

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Final Report
Technical Standards under the Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities

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Table of Contents
1 Executive Summary ....................................................................................................... 3
2 Overview of the Final Report .......................................................................................... 4
3 Feedback Statement ...................................................................................................... 6
4 Next Steps.....................................................................................................................29
5 Annexes ........................................................................................................................30
5.1 Annex I – Cost Benefit Analysis..............................................................................30
5.2 Annex II Draft Technical Standards ........................................................................34
5.2.1 Draft Regulatory Technical Standard under Article 6(3) and 12(9) of EU
Regulation 2024/3005 ...................................................................................................34
5.2.2 Draft Regulatory Technical Standard under Article 16(5) of EU Regulation
2024/3005 .....................................................................................................................48
5.2.3 Draft Regulatory Technical Standard under Articles 23(4) and 24(3) of EU
Regulation 2024/3005 ...................................................................................................52
5.3 Annex III List of Questions......................................................................................59
5.4 Annex IV Securities Markets Stakeholder Group Advice to ESMA .........................60

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1 Executive Summary
Reasons for publication
The Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities (‘the Regulation’) was published in the Official Journal of the European Union on 12 December 2024. This regulation introduces a common regulatory approach to enhance the integrity, transparency, comparability where possible, responsibility, reliability, good governance and independence of ESG rating activities. In so doing it aims to contribute to the transparency and quality of ESG ratings and to the sustainable finance agenda of the European Union. In order to facilitate the smooth implementation of the Regulation there are a number of empowerments for ESMA to deliver draft regulatory technical standards in the areas of authorisation, recognition, separation of activities and disclosures. ESMA launched a public consultation on these draft regulatory technical standards in May
2025. The public consultation closed on 20 June. In total 57 responses were received in
response to the public consultation from a wide variety of stakeholders including financial market participants, industry associations, academics, rating providers and other interested parties. ESMA has revised the three RTS to take into account the feedback received to the public consultation. For the RTS on authorisation and recognition this has involved the removal or simplification of a number of information requirements. For the RTS on separation of business, the requirement for a physical separation of staff remains, however other requirements such as requirements for network segmentation have been clarified or removed when it was judged to be imposing excessive burden. For the RTS on Disclosures a number of elements have been revised to ensure they are practically achievable by ESG rating providers, while others have been removed when it was judged they did not provide sufficient added value for the burden that was imposed. Elsewhere, ESMA has maintained the approach of the consultation paper with regards to the
Table that sets out the sequence and structure of disclosures, and has kept it limited only to
those items intended for public disclosure. Limited revisions have been made to the cost benefit analysis to reflect views provided. Contents The main body of this Final Report (section 3) summarises the contributions received to the consultation conducted by ESMA and explains how this feedback has been considered in the revised technical standards.

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Annex I presents the revised cost benefit analysis.
Annex II presents the full text of the final draft RTS.
Annex III sets out the list of questions contained in the Consultation Paper.
Next Steps
ESMA has submitted the draft technical standards to the European Commission for adoption by means of a Commission Delegated Regulation (for RTS). The technical standards will also be subject to non-objection by the European Parliament and Council. 2 Overview of the Final Report
2.1 Background

1. The Regulation was published in the Official Journal of the European Union on 12
   December 2024 and entered into force on 3 January 2025 . It included a number of empowerments for ESMA to provide technical advice to the European Commission on draft regulatory technical standards, with a deadline of 2 October 2025.
2. This Final Report contains the technical standards covering under Articles 6(3), 12(9),
   23(4) and 24(3) of the Regulation. The content of these technical standards relates to (i) applications for authorisation (ii) applications for recognition (iii) separation of business (iv) disclosures to the public, users and rated items.
   2.2 Public Consultation Process
3. ESMA launched a public consultation on these draft regulatory technical standards in May
4. The public consultation closed on 20 June.
5. Feedback received to the public consultation provided significant levels of information for
   ESMA to consider. In considering this feedback ESMA has also been mindful of the wider initiative for simplification and burden reduction. As a result, the revisions to the finalised RTS have aimed at removing or clarifying elements which could be considered unduly onerous or ambiguous. 1 REGULATION (EU) 2024/3005 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 November 2024 on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities, and amending Regulations (EU) 2019/2088 and (EU) 2023/2859

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5. In the revised draft RTS ESMA has aimed to strike a balance between the competing
objectives of the Regulation and interests of relevant stakeholders.

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3 Feedback Statement
3.1 Applications for Authorisation and Recognition
6. A total of 44 respondents provided comments in response to Question 1 of the Consultation
Paper.
7. In this regard, the finalised proposed draft RTS under Articles 6(3) and 12(9) is set out
under Annex II Section 7.2.1 of this Final Report
8. A total of eleven respondents indicated full agreement with the proposed draft RTS.
Feedback was also largely supportive of the draft RTS and the approach of merging the empowerments for authorisation and recognition applications into a single technical standard.
9. All other respondents provided general remarks that suggested areas where the draft RTS
could be simplified, clarified or reduced in terms of the level of information being requested.
10. General comments on the RTS were provided as follows:
11. Regarding the approach of consolidating the technical standards for both authorization and
recognition into a single RTS, three respondents support ESMA’s effort to reduce duplication and regulatory simplification, while one respondent highlights that the regulatory, geopolitical, and economic conditions may diverge over time and that a unified RTS could limit ESMA’s flexibility to adapt these frameworks separately in the future. Five respondents indicated that the ESG Rating definition provided by Level 1 regulation is broad and vague, resulting in unclear boundaries regarding which products fall within or outside the scope of the Regulation.
12. Two respondents agreed with the machine-readable requirement for submitted
documentation but requested concrete examples to reduce regulatory uncertainty.
13. Two respondents stressed the need for guidance from ESMA on what kinds of
circumstances, according to Article 6(5), would be considered material if changed and therefore required to be communicated to ESMA, in order to avoid a large number of burdensome notifications.
14. One respondent stressed that certain global organisations operate through several legal
entities across jurisdictions and that some organisational functions may be provided at group level or from group affiliates. This organisation model may result in multiple entities contributing to the work of assigning ESG ratings.

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15. Three respondents raised the lack of a clear definition for consulting services as being an
issue hindering implementation, while one of them also noted that the ability to mutualise group support functions was not clearly defined.
16. Regarding the recognition of third-country ESG rating providers, one respondent
mentioned that they considered the requirements are overly restrictive compared to other regulations and more burdensome than those for authorisation of EU-based providers. Additionally, two other participants requested the removal of the net turnover limit for non￾EU providers.
17. One respondent agreed that requiring rating providers to submit detailed explanations of
their models, rating assumptions and sectoral materiality frameworks is critical to ensuring consistency and comparability. It recommended to assess whether applicants have procedures in place for engaging with rated entities, particularly those in complex sectors. Understanding whether and how a provider incorporates issuer feedback or sectoral expertise can provide early insights into methodological integrity.
18. Finally, one respondent suggested that applicants should also provide a signed statement
outlining how their governance and data-quality controls mitigate potential systemic ESG rating failures. This statement should additionally describe how the rating models incorporate data from SMEs and minority-owned issuers.
19. Comments on the specific requirement listed in Annex II of the RTS were provided as
follows:
20. Seven respondents commented on the ownership structure and the chart showing
ownership ( Part D) links between any parent undertaking, subsidiaries, and other associated entities. Six of them stressed that the requirement goes beyond the scope of the Level 1 provision by extending it to subsidiaries and, in particular, associated entities. These respondents suggested providing only a clear and comprehensive overview of the applicant entity’s ownership structure. One respondent requested clarification on the definition of "associated entities."
21. Five participants commented on Part F (Senior Management) . ESMA received four
comments regarding the requirement for recent criminal records of senior management. Three respondents highlighted that, in some jurisdictions, obtaining such records can be costly and difficult—especially if the individual left their country of origin at a young age. They suggested allowing a self-declaration instead. Another participant in the consultation requested clarification on the term “recent”. Two respondents stressed that certain information of personal nature (e.g. place of birth, date of birth) should not be necessary.
22. Twelve participants provided comments on Part G (on Analytical resources). Four
respondents requested clarification on the meaning of “directly involved” in “ESG rating activities.” One respondent noted that some providers may not have employees who meet

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ESMA84-2037069784-1184 the definition of rating analysts, as their score calculations are performed by algorithms based on predefined rules and formulas for aggregating and weighting ESG data, without any analyst discretion. Another respondent questioned whether it is necessary for ESG rating providers to disclose information about “any person” suggesting this may be excessive, as not all individuals are critical to the ESG rating business.
23. Four respondents argued that requiring the disclosure of analysts’ names, roles, and types
of contracts goes beyond the scope of the Level 1 text. To remain proportionate and aligned with the Regulation, they suggested limiting the requirement to reporting the average number of years in a role and in the industry, per role category. One respondent also emphasized that the distinction between rating analysts and other staff is already defined in the Regulation, and ESMA should ensure consistency so that the scope of these obligations remains aligned with the Level 1 requirements.
24. Seven respondents provided comments on Part H (Expected Market Coverage). Four
participants requested clarification on the definition of “ESG Rating product,” noting that it could encompass a wide range of ESG data products. Two respondents argued that the requirement to report on geographical markets is overly burdensome and disproportionate. Finally, one respondent asked for clarification on the time period that the information regarding expected products and the expected number of rated items should cover. It also stressed that the terms used in this section are not defined in the Regulation, but assumed that an “investor-paid ESG Rating” would not be considered unsolicited by ESMA.
25. Regarding Part I (on the procedures and methodologies of ESG ratings) of Annex II,
ESMA received comments from ten respondents. One respondent considered the process onerous and likely to result in a lengthy application. Additionally, another respondent highlighted that it would be burdensome for firms seeking authorisation to prepare both the actual disclosures and a slightly less detailed version for the authorisation application, especially since the latter does not directly map to the actual disclosures. This was seen as creating an undue procedural burden.
26. Conversely, one respondent suggested that the RTS should provide more guidance on the
structure and granularity of the expected information to assist providers in their submissions. Furthermore, another respondent proposed the inclusion of the following elements: i) Transparency regarding the scoring grid and any potential deviations based on company-specific contexts; ii) A specific point addressing engagement procedures with rating entities to ensure direct feedback can be considered, particularly in cases of factual errors; iii) A specific point related to the assessment of controversies; iv) A requirement that ESG ratings be based on the most recent available reporting, with a reasonable timeframe for data integration. Finally, one respondent requested clarification on the meaning of “model” in this context.

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27. Four respondents requested clarification on the definition of “scientific evidence” and the
reference to “other relevant international agreements.” Additionally, one more respondent called for greater transparency when “scientific evidence” is cited.
28. Four respondents commented on the review of ratings and methodologies. They noted that
reviewing individual ratings is burdensome, while Level 1 only requires regular review of ESG rating methodologies. Accordingly, one respondent suggested deleting the proposed requirements related to individual rating products, models, and assumptions, as these go beyond the scope of Level 1.
29. One respondent emphasized that changes to methodologies, models, and key rating
assumptions should be announced well in advance of their implementation, and that changes during an ongoing rating process should be avoided. On the same topic, another participant requested clarification on: i) When updates must be made to previously provided information; ii) The threshold of significance that would trigger an update to the methodology; iii) How such updates would be communicated to the market, including affected rated entities.
30. Finally, one respondent sought confirmation that second-party opinions (SPOs) containing
a form of grading would not fall within the scope of the Regulation as ESG ratings. In any case, for SPOs that are in scope, the respondent suggested clarifying that the Regulation and RTS apply only to the ESG ratings contained within the SPO, not to the entire SPO.
31. ESMA Response: ESMA has made a number of changes to the final draft RTS to take on
board the comments and feedback raised during the consultation. The first main change concerns Part D of Annex II (Ownership Structure). In the revised draft RTS the scope of the chart showing ownership links has been reduced from parent undertakings, subsidiaries and any other associated entities, to just parent undertakings and subsidiaries.
32. Second, changes have been introduced under Part F of Annex II (Senior Management)
to simplify the provision. In order to address questions as to the potentially limited relevance of a criminal record from the “country of origin”, ESMA has now revised the provision so that it is looking for a criminal record file. This can now be either the country of origin, countries of residence or a combination of these, depending on the personal circumstances. If the person in question has been resident in multiple countries, then the criminal record certificates should cover each of those countries, if the person has only been resident in one country, then it is only necessary to receive the element from that country. In addition, ESMA has revised the provision so that it is now only focused on a set list of financial crimes. The revised wording of the provision is less prescriptive than before and allows for this flexibility. The provision is now also fully aligned with other ESMA’s relevant sustainable finance supervision mandates.
33. Third, ESMA has simplified the provision concerning information on staffing resources
under Part G of Annex II (Staffing Resources). Previously it was necessary to provide 5

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ESMA84-2037069784-1184 data points for each person directly involved in the provision of ESG ratings. To simplify, ESMA has revised the RTS so that it is now only necessary to provide a description of the number, training and experience of the staff within the entity. This has been split into different parts, with a dedicated section to describe analysts, and then a separate section to describe the staff that are not carrying out the function of rating analysts. ESMA recognises that some entities may not employ staff that would be categorised as “rating analysts” and therefore the second part which allows the applicant to describe the positions of the persons that it does employ would be more applicable. In addition, there is the possibility for the applicant to provide a description of the staff that are employed in support roles such as compliance and information technology.
34. Fourth, ESMA has simplified information to be provided in respect of Part H of Annex II
(Expected Market Coverage) by reducing the amount of information to be provided to a description of the products to be offered in the EU and the number of rated items per product.
35. Fifth, the reference to the provision of “models and key rating assumptions” has been
removed from Part I of Annex II, it is sufficient for an entity to provide its methodology.
36. Sixth, for entities applying for Recognition ESMA has reduced the information to be
provided in respect of Part C of Annex III (Information on ESG ratings intended to be distributed in the Union). Here the RTS is no longer asking for a list of ratings that includes four data points for each rating. It is now sufficient to simply provide a list of the ratings in .csv format, with no specified data points. No less information can be required on the basis that this is a requirement that derives from the Level 1 Regulation.
37. Finally, numerous other minor changes have been introduced to improve clarity or ensure
that what is being requested from applicants is feasible and relevant for ESMA’s supervisory assessment.
3.2 Separation of Activities
38. A total of 41 respondents provided comments in response to Question 2 of the Consultation
Paper, which dealt with the empowerments under Article 16(5) of the Regulation. A total of four respondents outlined that they fully agreed with the proposed draft RTS, with no additional comments or suggestions.
39. Other respondents provided comments which largely focused on one particular aspect of
the draft regulatory technical standard, namely the requirement for the physical separation of staff under Article 1(1)(b). A number of contributions opposed the proposed measure on the basis of proportionality and undue imposition of costs.
40. In this regard, most respondents believed that the requirement, as drafted, was too
prescriptive and rigid. Other respondents claimed that this was a substantially new

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Article 2 would already achieve the goal of ensuring an appropriate level of segregation
between activities while also being practicable to implement. Another respondent claimed that incentivizing remote work should be regarded as a viable alternative to physically separate the different irreconcilable activities in the same office.
41. Some respondents also expressed the view that the requirements were particularly
disproportionate for smaller providers. For instance, one respondent proposed that the physical separation requirement should only be implemented where the ESG rating provider has more than 10 full-time rating analysts at its disposal.
42. In relation to the self-declaration requirement in Article 1(1)(c), one respondent claimed
that the requirement created only an additional obligation for ESG rating providers without delivering additional benefits. Another contribution made the point that a code of ethics, coupled with self-declarations on personal investments, holdings and outside activities, would suffice, noting that existing policies and procedures already ensure employees have roles that prevent them from engaging in the activities listed in Article 16(1). Additionally, a few respondents considered that the requirement for a conflict of interest self-declaration by staff to be conducted “at regular intervals” in Article 1(1)(c) was excessively vague, leading to inconsistent interpretations. Finally, one respondent suggested that these are signed off by the hierarchical superior of the declaring employee to ensure managerial accountability for such declarations.
43. A minority of contributions highlighted that ESMA’s mandate to develop the RTS, as set
out in Article 16(5) of the Regulation, did not extend to paragraph 1 of the same Article, but only pertains to the derogation as set out in paragraphs 2, 3 and 4. As such, they suggested the deletion of the entire Article 1 of the RTS, which applies to all ESG rating providers covered by Article 16(1).
44. In relation to Article 2(1)(a), one respondent raised concerns that achieving “network
segmentation” would amount to an unnecessary, costly and time-consuming endeavor.
45. One contribution questioned the added value of the implementation of data classification
levels, as per Article 2(1)(b), noting that Level 1 already requires that non-public information be treated with care.
46. One respondent highlighted that clarification was needed on how frequently the training
set out in Article 2(1)(d) should occur and whether this should vary depending on the levels of understanding demonstrated following completion.
47. With respect to the “contractual measures that ensure compliance of employees,
throughout the term of their employment, with the internal policies of ESG rating providers”, pursuant to Article 2(1)(e), one contribution suggested that such contractual provisions

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48. In relation to Article 3, one respondent stressed that to perform the assessment of conflicts
of interest in point (c) at group level would be significantly onerous and provide limited value. Another response stated that the integration of ESG ratings into proprietary indices licenced by the same corporate group is a key structural risk unaddressed by the RTS.
49. More generally, several interpretational queries related to Level 1 were received, in
particular on the meaning of “consulting activities” and “direct involvement in the assessment process”. On the latter, one respondent claimed that no legal or structural separation should be required between analytical employees responsible for ESG methodology development and those executing technical implementation, given their need for regular collaboration.
50. A number of responses called for the measures and safeguards proposed in the RTS to
go further, including:

• putting in place controls around compensation arrangements to eliminate or
  appropriately manage conflicts of interest;
• requiring the disclosure of the nature of compensation arrangements or any other
  business or financial relationships with rated entities;
• conducting diversity and ethics training;
• requiring public disclosure of intragroup services.

51. One respondent stated that a clarification was needed on whether an ESG rating provider
    and a separate entity within the same group - providing services under Article 16(1) - are permitted to share functions such as IT, HR and senior management.
52. ESMA Response: With regards to the request for greater proportionality for smaller
    players, ESMA recognises that these entities face greater challenges in complying with certain provisions of the RTS compared to larger entities. For this reason, the Regulation includes a temporary regime under Article 5 that provides for an up to 3-year exemption for small undertakings 2 from complying with Article 16, including the present RTS. Furthermore, ESMA has decided not to introduce additional measures beyond those already consulted on, as many of the measures proposed by respondents, such as 2 ESG rating providers established in the Union categorised as a small undertaking or as a small group within the meaning of Article 3(2), first subparagraph, or Article 3(5), first subparagraph, respectively, of Directive 2013/34/EU.

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ESMA84-2037069784-1184 pre-contractual due diligence, safeguards related to compensation arrangements and additional disclosures, already result from Articles 25 and 26 of the Regulation.
53. ESMA accepts that the term “at regular intervals” may raise questions as to the required
frequency of the submission of the self-declaration under Article 1(c) and lead to inconsistency in market practices. As such, ESMA has amended the provision to require the submission to take place “once every 12 months”.
54. In relation to the calls for the code of ethics and other internal policies and procedures of
entities to suffice for the statement by analysts that they will not engage in conflicting activities, instead of a dedicated self-declaration, ESMA notes that if the declaration already exists within a code of conduct or similar internal document and requires annual attestation, the requirement can be considered to be met. Moreover, ESMA believes that the increased burden of requiring a managerial sign-off for the self-declaration is not justified by the little perceived benefits of such a measure in safeguarding the independence of employees.
55. In light of the numerous comments from respondents reflecting the complexity of the
proposed measures in Article 1(1)(b), ESMA has shifted from the concrete references to “segregated office space” and “secure access” to a more principles-based approach focused on the independence of ESG rating activities and impartial decision-making, with the intent to provide more discretion for entities in fulfilling the physical separation requirement. ESMA further notes that physical separation can be achieved through simple measures that enable ESG rating providers to function effectively without excessively hindering collaboration or incurring significant costs. For example:

• allocating different floors or separate office wings for analysts or teams engaged
  in conflicting tasks;
• using partition walls or separate doors;
• related measures, such as restricting access to shared printers and/or meeting
  rooms or implementing a clean desk policy to ensure sensitive materials are not left unattended.

56. ESMA disagrees with the view that imposing physical separation measures would not be
    supported by its legislative mandate to develop the present RTS under Article 16(5) of the Regulation, on the basis that Article 16(1) is not explicitly referred to in the empowerment. The rationale being that ESMA has been tasked with specifying "measures and safeguards (...) pursuant to paragraphs 2, 3 and 4" (which in turn relate to points (d), (f) (paragraph 2), (c) (paragraph 3) and (a), (b) and (e) (paragraph 4), i.e. all of paragraph 1, and considers that physical separation is a justified measure or safeguard that should be taken in addition to the legal separation required by Article 16(1).
57. In response to the questions raised by respondents, ESMA has removed the term “network
    segmentation” from Article 2(1)(a), as it understands the same practical result can be

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ESMA84-2037069784-1184 achieved with the sole reference to “role-based access”. The rationale is to ensure that employees only access what they truly need to fulfil their role. This reduces the possibility for actual or potential conflicts of interest to materialise through access to sensitive information.
58. ESMA disagrees with the view from a minority of contributions that Article 2(1)(b) is a mere
replication of the Regulation’s requirement to treat confidential information adequately, as it goes far beyond confidential data. The measure involves the classification of all internal documentation into levels based on sensitivity or potential for misuse (e.g. public, internal use only, confidential, highly confidential) in order to prevent employees or departments from accessing documents that could give rise to biased decision-making or misuse for personal or organisational gain.
59. Despite the call for a more precise definition of the required frequency of training on the
importance of information barriers in Article 2(1)(d), ESMA prefers to maintain the non￾prescriptive term “regular”, providing flexibility for entities to make their own judgements through a risk-based approach.
60. In addition to the changes to Article 2 listed above, ESMA has also removed the reference
to the group-level applicability of the proposed measures, given that this already results from Article 16(2) of the Regulation (“In implementing such measures, the ESG rating provider shall also take into account the activities of the group to which it belongs, if applicable”). Additionally, while keeping the need to perform compliance monitoring activities vis-à-vis the identification of conflicts of interest in Article 2(1)(f), ESMA has redacted the reference to the review of employees’ communications to avoid being excessively prescriptive, moving this instead to Recital 2 as a non-binding example of a best practice that would fulfil the requirement. Finally, ESMA has reduced the mandatory frequency of the assessment of the adequacy of the measures implemented under Article 2 to once every 24 months, on the basis that this would not substantially affect their appropriateness and sufficiency.
61. In relation to the several interpretational queries vis-à-vis terms viewed by respondents as
ambiguous in the Regulation (“consulting activities”, “direct involvement”), ESMA takes notes of these issues which are nevertheless beyond its empowerments under the Regulation. However, ESMA is aware of the importance of further clarity on these issues and will consider the feasibility of further action.
62. ESMA also wishes to highlight that it is not the purpose of the present RTS to address the
topic of the sharing of functions between two or more entities within a corporate group providing the services listed in Article 16(1) of the Regulation.
63. Finally, other aspects raised by respondents that are unrelated to the legal empowerment
under consideration or that pertain to choices made by the co-legislators, fall outside the scope of this Final Report and cannot be addressed herein.

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64. In addition to the changes set out above, ESMA has also performed minor drafting
amendments and language refinements to the recitals and Articles 1, 2 and 3 in order to enhance the clarity and readability of the RTS.
3.3 Disclosure to the public, users of ESG ratings, rated items and
issuers of rated items
65. A total of 48 respondents provided comments in response to questions 3 and 4 of the
Consultation Paper.
66. In this regard, the finalised proposed draft RTS under Article 23(4) and 24(3) is set out
under Annex II Section 7.2.3 of this Final Report.
67. A total of three respondents outlined that they fully agreed to the request under question
3, with no additional comments or suggestions.
68. Comments received from all other respondents generally supported ESMA’s proposals and
the aim for increased transparency and comparability of ESG ratings, with differing views on the level of prescriptiveness. In this regard, there were a large number of respondents who proposed the inclusion of elements that would have gone beyond the Level 1 mandate. At the same time there were also significant number of other respondents who were strongly of the view that the proposed draft RTS should be less prescriptive than currently drafted. In this case, respondents requested simplified wording or deletion of requirements altogether. ESMA has sought to strike a balance between these competing viewpoints in the final draft RTS.
69. Examples of areas where respondents requested more detail and specificity, are
indicatively the verification of information used by ESG rating providers and transparency on data completeness, consistency checks or the monitoring of the rating production process. In certain cases, respondents requested that these disclosures be made in machine-readable form.
70. Elsewhere, some respondents provided comments which highlighted the difficulty in
applying the 48-hour pre-notification rule of the level 1 framework requesting further clarity in this regard. For instance, one respondent suggested to add a new article requiring mandatory feedback and feedback deadlines for ESG rating providers for enquiries from rated items and sufficient feedback deadlines for rated items for enquiries from rating providers.
71. Other comments from respondents proposed that the RTS require the disclosure of how
data sources are considered trustworthy or are “vetted” by the ESG rating provider, and the methodology for such checks. Other respondents suggested that ESG rating providers disclose how they integrate decarbonization pathways and regulatory compliance and sector-specific materiality considerations into their methodologies. It was also suggested

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72. Some respondents also proposed that certain disclosures should be contained in the ESG
rating report itself, rather than on the website of the provider, and that these could instead be accompanied by relevant links to the ESG rating provider website. At the same time, from the perspective of ESG rating providers, a number of respondents stressed the need to preserve the confidentiality of proprietary business information with regard to methodologies.
73. A number of respondents also raised comments concerning scope of the level 1 regulation
itself, including the issues of interoperability with other pieces of related legislation. For instance, some respondents invited ESMA to consider introducing the possibility to cross￾refer to information on organisation-related items in product-level disclosures and take account of the 2019/2088 Regulation. Specifically, one respondent suggested to introduce (i) machine-readable taxonomy references, (ii) version-history flag, and (iii) encourage visual summaries in an infographic-style overview.
74. With regards Article 1, which specifies that the RTS addresses disclosures to be made
under Annex III.1 and Annex III.2 of the regulation, one respondent considered there are no significant benefits to combining the empowerments for these disclosures in a single RTS.
75. Regarding Article 2, which specifies that disclosures made in accordance with Annex III.1
of the Regulation should be presented in accordance with the sequence and structure of the Table in Annex I of the RTS, one respondent argued against the wording “sequence and structure” and requested that ESG rating providers be granted greater flexibility. Another respondent suggested to include only a recommended format, rather than a mandatory sequence, on the basis that this would allow providers to better accommodate their methodological specificities. One respondent suggested that the information related to organisational disclosures should be provided separately. A number of respondents also suggested that ESG rating providers should be able to cross refer to information that has already been made published to avoid duplication of disclosures.
76. A large number of responses received in respect of Article 3, which requires a range of
rating level disclosures around what is rated and what risks and impacts are measured, were strongly opposed to the formulation of Article 3(1)(a), which sought disclosures of information about what was rated by those ESG ratings. These focused on the following issues:

• The disclosure of the name of the rated item or the name of its issuer would go
  beyond the requirements of Level 1.

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• The specification by ESMA of letter (f) of Annex III.1 of the Regulation should
  remain focused on the general methodology regarding the type/family of E, S, G rating or scoring, rather than referring to specific rated entities.
• The list of rated items covered by an ESG rating can be extensive and variable.

77. Alongside these arguments, one respondent pointed out that, while the Level 1 text
    recognises the differences between the issuer-pays and subscriber-pays models, the RTS does not sufficiently recognise that these models are not the same. Consequently, requiring that ESG rating providers publish, for every rated item, its name, legal status and entity-specific methodology would not be pertinent for ESG ratings under the subscriber￾pays model and would not be aligned with the Regulation. In the view of the respondent, in a subscriber-pays model, public disclosures should be provided at a methodology level for each kind of ESG rating and not per ESG rating.
78. Similarly, the view was expressed that, if unchanged, Article 3(1)(a), would result in a
    proliferation of disclosures, inadvertently leading to a risk of frontrunning and possibly harm the commercial viability of ESG rating providers. In addition, disclosing the name of the rated item or issuer as part of the obligations under the RTS could lead to disclosure of sensitive information and cause significant harm to related legitimate business interests.
79. Regarding Articles 3(1)(b) to (d), which sought disclosure of specific risks or impacts that
    ESG ratings considered, a respondent, asked to confirm that “risks” and “impacts” used in this context refer to the two aspects of double materiality and that the term “impact” is intended to cover only negative impact. Another respondent referred to a requirement to replicate CSRD impacts risks and opportunities framework on the specific opportunities covered, where the ESG rating is assessing opportunities. Other respondents proposed to add some non-exhaustive examples of what qualifies as “specific issues” or to specify whether the specific risks and/or impacts are identified at a sectoral, company level, or both. Respondents also proposed that ESG rating providers should refer to the list of sustainability matters provided by the ESRS, where applicable.
80. On the other hand, respondents argued for a less prescriptive formulation for Article 3(1)
    (b) - (d) by deleting the reference to the specific risks and impacts. They also mentioned that it appears complex in practice to assign specific percentages to each materiality dimension, particularly in cases where both financial and impact materiality are intertwined. In their view the information provided here could refer to a more general description of how the rating provider combines the risk and impact materiality.
81. Regarding Article 3(2)(a), which sought disclosure of what was covered under the E, S or
    G factors of an ESG rating, one respondent stressed that the description of these aspects should also include their weightings as well as whether the ESG rating products are customized based on geographical location, company size, or e.g., the industry sector. In their view, The ESG rating provider should also explain how and why the individual ESG rating products are created. Another respondent stressed that most ESG Ratings providers

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82. Conversely, another respondent argued against the suitability of separate disclosures
under E, S and G for certain products and that providers should be allowed to apply these requirements only where relevant, rather than being subject to a one-size-fits-all obligation.
83. Regarding Article 3(3)(a), which sought disclosure of whether an ESG rating considered
alignment with the Paris Agreement or other international agreements, a number of respondents asked for further guidance on what qualifies as an “international agreement” and the level of granularity expected. Other respondents stressed that reference should be provided by the RTS to a more comprehensive list of relevant international agreement or frameworks and whether voluntary standards such as OECD Guidelines, GRI and ISSB are in scope of the term.
84. Regarding Article 3(4), which sought disclosure on whether an ESG rating is expressed in
absolute or relative values, one respondent asked for confirmation as to what the terms “absolute” referred to, suggesting that absolute should be considered as the raw, standalone value of a risk rating or metric, without comparison to other entities, time periods, or baselines and it quantifies the risk in concrete terms, based on the underlying data, useful for understanding severity or magnitude independently. The same respondent considered that the term “relative” should be considered as referring to a comparative value of a risk rating or metric, expressed in relation to another entity, benchmark, or time-period.
85. A number of responses focused on the provisions of Article 4, on general methodological
disclosures. Relating to Article 4 (1), which concerned the overview of a methodology, respondents raised the following comments:

• Certain specified disclosures should only be required on a “where applicable” basis.
• Clarity was requested on what is expected under “name or unique identifier of the
  applicable methodology” and how standardized it is across ESG rating providers.
• The specification on “the time-horizon of the backward-looking data and forward￾looking data taken into consideration” was considered to go beyond the Level 1 text
  since the information required should be focused on the analysis, as opposed to every data point.
• Requiring public disclosure of “how major new information is taken into account in
  the methodology” - is already prescribed in the Regulation under Annex III, point 2(f).

86. Amongst suggested additions for the disclosure elements in the RTS, one respondent
    proposed to also request information on whether and how industry-specific indicators and/or weightings are applied. Another respondent suggested enhanced transparency on

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87. Regarding the ranking system disclosures, a respondent argued that requiring an
‘illustrative example’ of how the ESG rating system should be understood, could be potentially misleading and overly simplistic.
88. One respondent highlighted that the timeframe for informing users and rated entities of
material changes to methodologies should be reasonable so that changes are made public with sufficient time before their first application and they should not be applied with retrospective effect to information already published.
89. Regarding Article 4(2), which sought disclosure of information on the industry classification
used, one respondent suggested to also require disclosure of the classification level applied. Conversely, another respondent highlighted that some industry classifications are private and proprietary and that there should be no obligation for the ESG rating agency to publicly disclose this information.
90. Another respondent suggested to delete the disclosure of “the link to the official
documentation of the industry classification system, if available”, as this could significantly harm to the legitimate business interests of ESG rating providers who use proprietary industry classification systems.
91. It has also been stressed that the access to the information required under Article 4(2)
should be restricted to regulators and ESG rating users only since publicly disclosing such information could undermine competitive business strategies and adversely affect revenue models.
92. Regarding Article 4(3), which sought disclosure of information on the use of scientific
evidence, one respondent asked to clarify the meaning of “the relevance of scientific evidence to the rating methodology”. Others stressed that asking to list scientific studies would be disproportionate and that requiring disclosure of ‘the title, author and publication dates of the studies, models or frameworks’ had no legal basis.
93. Regarding Article 4(4), which sought disclosure on the use of artificial intelligence in data
collection and rating process, a respondent suggested deletion of this provision as the Level 1 text is sufficiently clear. In addition, the expected classification of AI technologies into specific “types” introduces unnecessary uncertainty. On the other hand, the integration of AI-related risks was welcomed, with one respondent requesting that the RTS go further and request disclosure on the extent to which ESG rating providers rely on such technologies. In addition, with regard to “risks and limitations”, ESMA was asked to confirm

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94. A number of respondents provided views in respect of Article 5, which sought disclosures
on the limitations of data sources, with some arguing that it was redundant or that it exaggerated the limitations of data sources. Other respondents requested more clarity around the differences between the term “data” and “information” and what was meant by the term “proxy reference points”. Other respondents requested additional disclosures in areas such as; data propagation methodologies and data validation and quality checks.
95. One respondent requested further guidance on how complaints, made against an entity
being rated by an ESG rating provider, are reflected in the methodology. This respondent asked if such a complaint should be disclosed as a limitation under Article 5 of the RTS, if any caveats should be put on ratings where complaints are outstanding, under investigation or withheld, or if it is up to the ESG rating providers to decide how to deal with such issue within their own methodology.
96. Regarding Article 6, which sought disclosure of an ESG rating provider’s organisational
information, a few respondents asked for additional disclosure elements such as the criteria used in the pricing policy and how production costs are taken into account, while a large number of other respondents argued for more high-level and flexible provisions to preserve proprietary information, business interests and reduce unnecessary information burden.
97. Comments received in respect of Article 7, which sought a higher level of methodological
disclosures for rated items and users of ESG ratings, welcomed disclosures addressing non-public data collection and engagement with rated entities. Other comments questioned whether it was needed to further specify what should be disclosed in respect of the share of public versus non-public data used, the share of estimated data and the quality control processes used for sources. At the same time, other respondents questioned whether these may be too onerous for ESG rating providers. Finally, one respondent also proposed that ESG rating providers be required to remove outdated information from ESG ratings after a certain period (e.g., a maximum of 3 months) and base their assessments only on current and reliable information and give rated items the opportunity to comment to controversies.
98. Regarding Article 7(2), which sought disclosure on engagement with rated items and
issuers of rated items, one respondent highlighted that it would be helpful to provide non￾exhaustive examples of what constitutes “engagement”. It was also requested that ESMA clarify that providing a high-level explanation of engagement practices, applicable across all ESG ratings, would be deemed sufficient.
99. Regarding Article 7(3), which sought disclosure on any potential shortcomings in a
methodology, one respondent suggested deleting the RTS provisions here on the basis that the requirement in Level 1 already requests disclosure of same and as a result the

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RTS is duplicative for no added value. Another respondent asked ESMA to confirm that the requirement to describe “potential shortcomings of methodologies” relates only to potential shortcomings regarding “the use of pre-established statistical or algorithmic systems or models in ESG measures”.
100. Regarding the comments received in respect of Article 8, which sought disclosure on
the revision of methodologies, one respondent suggested a clarification that the disclosure of the potential impact of the revision of methodologies pertains only to assessments that are monitored on an ongoing basis, as opposed to one-off or point in time ratings. A clarification was also requested with regard to the meaning of the “engagement with stakeholders”.
101. ESMA Response: ESMA notes the large volume of comments and suggestions
provided in respect of Question 3. In this regard some comments and suggestions were focused on issues present in the Level 1 text, rather than the RTS. On the other hand, some comments and suggestions made in respect of the RTS suggested additions that would beyond ESMA’s empowerment and the scope of the RTS under Articles 23(4) and 24(3).
102. At the same time, for the feedback that was appropriately addressed to matters within
the scope of the RTS, ESMA notes that there was a significant divergence in opinion between respondents, with a significant portion expressing a need for expansion of the disclosure elements, and a smaller but still significant portion of respondents calling for a more flexible approach in favour of simplicity and burden and cost reduction.
103. With these competing viewpoints in mind, ESMA has adjusted its proposal taking into
account, on the one hand, the need for market relevance but, on the same time, the expected important benefits from increased transparency in this nascent regulated area.
104. With regards to Article 2, and the presentation of disclosures, ESMA has revised the
proposed Article to allow for ESG rating providers to utilise cross references and hyperlinks in their disclosure documents to the extent this is in accordance with the sequence of the
Table in the Annex of the RTS.
105. With regards to previous Article 3 (1) (a), ESMA acknowledges the concerns raised
and can clarify that the intention of these disclosures was per rating product type and not per specific rating. Nevertheless, the disclosure of this information may not be practical in the case of ESG ratings and accordingly, Previous Article 3 (1)(a) has been removed. To balance the removal of this provision ESMA has added a simpler disclosure element under the general methodological disclosures of Article 4(1)(b) to require a description of the different types of rated items under the Regulation in relation to the applicable methodology. ESMA considers that this information is key to enable a person to understand the nature of the item subject to an ESG rating.

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106. In response to requests for a more flexible formulation of disclosure requirements,
ESMA has adapted the wording in previous paragraphs Article 3(1) (b) – (d). Instead of the specific details on risks and impacts, a reference to the descriptions of risks and impacts is now proposed. Similarly, ESMA has revised the proposal so that it is clear it is not seeking disclosure of a numerical proportion of risk and impact, but rather a description of how this materiality is taken into account in the applicable methodology.
107. With regards to Article 3(2) and 3(3), ESMA takes note of a number of comments
related to the need for deeper transparency on the contents of E, S, G, on their applicable weightings and on international agreements. ESMA has decided not to add further disclosures in this regard in favour of simplification and burden reduction and considering that the Level 1 formulation of Annex III.1 and Annex III.2 related points, are already sufficiently comprehensive. Also, ESMA stresses that a reference to “where applicable” is already included under Article 3(2).
108. With regards to the previous Article 3(4), In light of requests for simplification, ESMA
has removed the requirement to disclose the ranking system on the basis that this is now covered under the new Article 4(1) (e) of the RTS.
109. With regards to article 4(1), on general methodological disclosures, significant revisions
have been made considering the feedback received. Along with the changes already mentioned in the previous paragraphs, ESMA has included the term “where applicable” under different sub-points, to accommodate the possibility that not all elements can be disclosed for all ESG rating products. ESMA has also removed some disclosure requirements on the basis that the burden imposed was not balanced by the value provided given the requirements already included in level 1 Annex III.1 and Annex III.2. These include the unique-identifier number of the methodology version, the time-horizons for data taken into consideration as well as information on how major new information is taken into account and data estimation methods.
110. In response to concerns raised around the details put forward by ESMA on the use of
scientific evidence in methodologies, ESMA has reformulated previous Article 4(3) in a less prescriptive way while focusing on the process for identifying relevant specific evidence in accordance with the applicable methodologies. The new Article 4(4) replaces the consulted version under Article 4(3), which was seeking disclosures on types of Artificial Intelligence used in the data collection process. This has been removed on the basis that it provided limited specification over and above what was already required by Level 1.
111. A number of responses focused on the need for more transparency around the
engagement procedures applied by providers regarding the rated items and on the various sources used including public or non-public sources. Acknowledging that these are central disclosures and should be publicly available, ESMA has added a disclosure specification to the RTS. To this end, under Article 4(3), ESMA is now requesting transparency on the

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112. ESMA has revised previous Article 5 (c) to streamline the formulation along the
wording in this Article. ESMA has also deleted the reference to limitations stemming from the engagement with rated items and issuers of rated items. This has been moved to the more appropriate location of Article 4 on the basis that engagement with rated items is considered to be part of the ESG rating providers related process.
113. On the comments received relating to the organisational disclosures of Article 6, ESMA
has noted the requests for simplification of these provisions. In this regard, ESMA has adopted a more flexible approach towards less regulatory burden. For example, ESMA revised the wording to focus on disclosure of the main risks of conflicts of interest that are posed by a provider’s organisational structure and areas of activity. It is no longer necessary to provide disclosures on why identified issues are considered to pose a risk, or the steps taken to mitigate those risks given also the level 1 related disclosure element.
114. With regards to Article 8 and requests for more clarity on what is expected to be
disclosed in respect of the revision of data and methodologies, ESMA has provided more clarity on the provisions and in view of related consultation feedback, requested a disclosure on the criteria that ESG rating providers use for determining what constitutes a material change to a methodology. ESMA considers that this should provide greater levels of transparency, without being overly rigid or prescriptive for ESG rating providers. At the same time and despite specific requests by other participants, ESMA has not limited the public general methodological disclosures (in Article 4) only to the changes of methodologies that are material. This would be contrary to the level 1 approach where all changes in methodologies have to be referenced in the public disclosures (Annex III.1.a).
115. Finally, a number of respondents were concerned that ESMA is requesting disclosures
of non-public proprietary information. ESMA did not proceed to any change in this regard as article 15 (13) of the Regulation applies to all requested elements under the level 1 and this RTS. At the same time, ESMA underlines that the different ESG rating products offered by ESG rating providers are expected to be coupled by meaningful disclosures corresponding to a sufficient level of information to the public, the users, the rated items and issuers of rated items. This is to enable an appropriate level of due diligence, facilitate cross comparison with other ESG rating products, and understand any limitations of the product or the underlying methodologies and judge which product may best serve the user’s needs.
3.4 Expansion of proposed Table to include non-public disclosures:
116. A total of thirteen respondents outlined that they fully agreed to the request under
question 4, with no additional comments or suggestions.

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117. In general, nearly half of respondents supported the inclusion of a Table in a structured
sequence for all disclosures under Annex III.1 and Annex III.2 of the Regulation. These stressed that an expanded table could facilitate a more efficient and coherent compliance reporting process for ESG rating providers, as well as enhance the usability and accessibility of the disclosed information for end users, including investors, regulators, and other stakeholders. A harmonized disclosure framework would contribute to greater transparency and comparability across the ESG rating landscape.
118. Conversely, the other half of respondents strongly opposed to an inclusion of an
expanded table and, more generally, to a common sequence and structure for all disclosures.
119. More specifically, respondents in favour of an expanded table for all disclosures under
both Annex III.1 & Annex III.2 of the Regulation mainly focused on the following arguments:

• An expanded table would support consistency across ESG rating providers and
  offer a consolidated view of the complete set of disclosure requirements. Furthermore, a standardised disclosure sequence could be particularly relevant for smaller providers and would also align more easily with taxonomy mapping for digital reporting (e.g., in ESEF or XBRL formats).
• ESG rating providers would have an organised, single and clearer reference
  point for disclosure obligations, reducing the risk of duplication or omissions. They would face less compliance ambiguity under a streamlined reporting process. Having a standardized table with a clear order would facilitate supervision and promote regulatory efficiency.
• An expanded table would facilitate comprehension and comparison in users’
  analysis, enhance readability while reducing the complexity of the information collection. It would also allow companies to more easily decide whom to engage with.
• A more transparent and systematic presentation of the information would enable
  automated integration by institutional investors; standardize reporting and reduced comparability issues. One respondent suggested to provide a machine￾readable template (e.g., CSV/XBRL) alongside guidance for human-readable summary tables.
• An expanded table would improve the user experience by making methodologies
  more transparent and accessible, benchmarkable and informative. In addition, it would eliminate potentially divergent interpretations of the draft technical standards under Articles 23(4) or 24(3).

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120. A respondent also suggested to consider the possibility of including two distinct tables,
one for each part of Part 1 and Part 2 of Annex III of the Regulation.
121. The respondents who discouraged ESMA to propose an expanded table for all
disclosures under both Annex III.1 & Annex III.2 of the Regulation were more in favour of a principle based and flexible approach. Overall, they did not support a table prescribing the sequence and structure for the disclosures either solely in relation to Part 1 of Annex III, or for Annex III.1 and Annex III.2 of ESGR. It was highlighted that a one-size-fits-all structure does not reflect the diversity of ESG rating models, which vary in scope, complexity, and methodology. The main arguments against the inclusion of an expanded
table are summarised below:

• ESG rating providers are best placed to decide on the way in which the
  disclosures are provided, corresponding with the structure of their other publications of regulatory and non-regulatory nature. They should be able to exercise their own discretion in determining how to present and format the disclosures in a way that best reflects their respective businesses and product offerings. This would improve the quality of, and practicability of providing such disclosures.
• Disclosure requirements in Annex III of the Regulation are already very detailed
  with no need of further specification. Also, the RTS should be principle-based and flexible to support pragmatic implementation. An overly restrictive fixed structure for disclosures could require significant changes to how ESG providers currently report, monitor, and track disclosures.

122. A respondent additionally stressed that the proposed structure does not align with other
     EU frameworks, and this would risk creating duplicate disclosures and confusion for users trying to reconcile different reporting systems—ultimately leading to fragmented ESG information.
123. Finally, a number of respondents stressed that it would be beneficial to have greater
     clarity on the expected frequency of public disclosures (e.g., asking whether such disclosures should be made annually).
124. ESMA Response: Taking into account the feedback received, ESMA has decided not
     to expand the table that covers the disclosures required by both Annex III.1 and Annex III.2. and retain its initial proposal covering the sequence and structure of the public disclosures to be made in accordance only with Annex III.1 and Article 23(1). This is because ESMA notes a clear divergence in the responses to this question depending on the type of respondents and whether they were users or providers of ESG ratings. Consequently, in ESMA’s view, the retained proposal is balanced and meets the needs of different stakeholders without unduly burdening ESG rating providers and is reflecting the formulation of the requirements under article 23 and 24 of ESGRR, respectively.

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3.5 Cost Benefit Analysis
125. A total of 35 respondents provided comments in response to question 5 of the
Consultation Paper.
126. A total of five respondents outlined that they fully agreed with no additional comments
or suggestions.
127. General comments received were provided as follows:
128. A number of respondents disagreed with the cost benefit analysis and raised a number
of general comments. In particular, concerns were flagged that enhanced compliance costs could be imposed in areas where the draft RTS exceed the mandates of the Level 1 Regulation, or where they introduced unnecessary complexities. In addition, it was highlighted that structural changes proposed by the regulations are significantly greater than estimated and the consequence would be that the smaller providers would be crowded out. It was also highlighted that there might be also costs linked to data traceability that are not taken into account. It was also considered that the imposed costs could be significant for an industry that is still developing and operates with relatively low margins and profitability.
129. It was also argued that larger ESG raters with more market share should bear higher
costs than smaller ESG raters to avoid creating entry barriers for new entrants. In this regard the respondent raised concerns around supervisory costs and operational costs that are not adequately represented. Another respondent suggested that a tiered approach to supervisory fees should be taken, with a transition period for small and medium providers before fees are charged.
130. General concerns were also raised for the viability of smaller and medium size entities
on the basis that a disproportionate volume of cost for small and medium sized providers could push these providers out of the market. For smaller providers it was also flagged that they may face disproportionately high fixed costs (including initial application or any recurring fees) or resource requirements (legal/compliance teams).
131. Other respondents considered that analysis underestimated the levels. In their view
costs relating to the setting up of the complaints channel on the website and to managing the concerns raised by rated entities, investors or any third party about ratings, methodologies and procedures, estimated could be around 2% of the current revenues generated by the ESG ratings activities. In addition, it was raised that the cost benefit analysis should also include the costs of setting up separated legal entities for specific business activities and the costs of establishing segmented support functions.
132. One respondent argued that the analysis does not consider the risk that excessive
methodological transparency could lead to the gamification of ESG ratings. Another

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133. Other respondents disagreed with the cost benefit analysis on the basis that it did not
appropriately consider the benefits of the regulation and the accompanying RTS. In view of these respondents’ certain benefits have been significantly understated and the analysis should explicitly value the avoided misallocation of capital due to poor ESG ratings. In their view the reduced externalities from directing capital toward truly sustainable issues, and the improved access to capital for underrepresented and minority-owned firms through more transparent and equitable ESG methodologies. Another respondent did not fully agree with the cost-benefit analysis on the basis that the intent to streamline procedures should not undermine the core objectives of compliance, transparency, and ensuring the effectiveness of ESG disclosures.
134. Another respondent agreed with the proposed cost-benefit analysis but suggested it
could be useful to conduct a follow-up analysis after the implementation phase to evaluate the impact on reducing the current administrative burden stemming from multiple non￾aligned ESG data requests.
135. Comments in respect of the RTS on Authorisation and Recognition were provided as
follows:
136. With reference to the RTS on authorisation and disclosure, one respondent agreed with
the approach to align the empowerments under Articles 6(3) and 12(9) into a single-draft RTS thereby reducing costs associated with compliance efforts. Another respondent stressed that the costs that may be incurred under the recognition and authorisation procedures may be different and that such distinction should be made in the cost-benefit analysis for the purpose of transparency.
137. Comments in respect of the RTS on Separation of Business were provided as follows:
138. With reference to the RTS on the separation of activities, requirements of physical
separation are significant it was suggested that ESMA should consider whether lower-cost alternatives (e.g. information barriers and regular trainings) could be sufficient in certain circumstances, especially for small-to-medium ESG rating providers, or whether requirements with respect to separation of activities can be delayed/phased in.
139. Other respondents argued that the physical and operational separation measures in
the RTS go beyond what is required at Level 1 and imply significant material costs. In their view these appear to be excessive given the ESG ratings market's actual risks and aligning this requirement with the credit ratings market's conflict-of-interest management framework overlooks key differences in the ESG market, which is less established, more volatile, and operates with lower fees and profit margins.

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140. Finally, another respondent argued that the analysis underestimates the operational
and technical costs for smaller providers for which establishing separate operational structures, physical and IT firewalls, and additional compliance monitoring introduces material fixed costs. In addition, according to this respondent, the requirement of activities separation would create a disproportionate cost for boutique or specialist providers which may discourage innovation, limit market entry, or force smaller firms to reduce their service scope to remain compliant.
141. Comments on RTS Disclosure were provided as follows:
142. A number of respondents highlighted what they considered to the be additional high
costs that would be imposed by the RTS on Disclosures. In this regard, one respondent considered that the disclosure requirements went beyond the Level 1 text and therefore are more costly than described. Another respondent highlighted that the the granularity required in the RTS would lead to increased costs for managing disclosures and this should be weighed against the decreasing marginal value of individual data points with the increase of total number of data points.
143. On the other hand, it was highlighted that the analysis did not consider the benefit of
reducing information asymmetry between ESG rating providers and rated entities or users. Enhanced public disclosures would support the objectives of transparency and cost reduction in the ESG rating ecosystem.
144. With reference to the RTS on disclosure, the respondent suggested that Table 1 should
also include disclosures made under Part 2 of Annex III of the Regulation to further simplify the RTS, thereby reducing compliance costs for ESG rating providers.
145. ESMA Response: It is important to highlight that the RTS are seeking to implement
provisions that are already established in the level 1 Regulation. In this regard, ESMA consider that the RTS on Registration and Authorisation now represents a balance between ensuring ESMA receives the information it needs and what is reasonable for applicants to provide. For the RTS on Separation of Business, ESMA has maintained the requirement for physical separation, but simplified and softened some of the more specific requirements related to physical separation of staff. Finally, for the RTS on disclosures, ESMA has made a number of revisions to reduce the granularity of the disclosures required in places. ESMA has also refrained from expanding the table specifying the structure of disclosures, on the basis that it would not be justified to expand to all disclosures. Finally, ESMA has simplified the ability of providers to comply with the disclosure requirements imposed by the RTS on Disclosures, allowing this to be met through cross-reference, instead of dedicated stand-alone disclosures and introduced numerous other revisions to reduce the level of granularity that is expected from the disclosures.

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4 Next Steps
146. ESMA will provide its finalised input to the European Commission before the end of
October 2025.

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5 Annexes
5.1 Annex I – Cost Benefit Analysis
Costs to ESG
Rating Providers
Costs to regulator Benefits
RTS on
Authorisation and
Recognition
There may be costs for ESG rating providers to prepare the authorisation or recognition applications in accordance with the requirements of the draft technical standards. These costs do not include those imposed by the level 1 regulation which in certain cases requires establishment in the EU and/or the separation of certain activities from the provision of ESG ratings. These costs are also exclusive of any supervisory fees that would be levied on providers. It is not foreseen that there will be significant extra costs to ESMA beyond those already foreseen under the level 1 regulation. The draft technical standards contribute to the European Commission’s efforts at burden reduction and simplification by combining the empowerments under Article 6(3) and 12(9) into a single draft regulatory technical standard, thereby ensuring that the procedures for authorisation and for recognition are as aligned and streamlined as possible. They also provide further clarity on the specific information that should be provided as part of their application for authorisation or recognition. RTS on Separation of Activities There will be costs for all ESG rating providers. The level of costs will vary depending on the nature and extent of It is not foreseen that there will be significant extra costs to ESMA beyond those already foreseen The draft technical standards aim to establish a level playing field amongst ESG rating providers by

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ESMA84-2037069784-1184 the additional activities to be carried out by the ESG rating provider. All ESG rating providers will need to implement the organisational and physical measures specified in the RTS. This may entail costs related to establishing separated office spaces for its employees directly involved in the assessment process of a rated item. Those ESG rating providers which carry out or are permitted to carry out the activities specified in Article 16(1)(c)(d) or (f) of level 1 must also put in place additional technical and internal control measures. This may entail additional IT, training and compliance monitoring costs. under the level 1 regulation, other than the deployment of supervisory resources to monitor compliance with the requirements of the RTS. ensuring that all providers implement minimal measures to ensure the prevention and mitigation of actual and potential conflicts of interest, irrespective of the complexity of their operations. The additional technical and control measures will ensure an appropriate level of additional safeguards to the integrity of the rating process for those ESG rating providers who carry out multiple activities within the provider. ESMA considers that these provisions are not disproportionate given that they are intended to compensate for the increased risks posed to the independence of analysts when multiple activities are carried out within the same ESG rating provider. Further to this the wording of the RTS has been

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ESMA84-2037069784-1184 revised to ensure there is sufficient flexibility around how physical separation is ensured. RTS on Disclosures There are limited costs imposed by these regulatory technical standards over and above what is created by the overarching level 1 regulation. Any incremental costs imposed by the draft regulatory technical standards can be broken down into two main categories (i) costs relating to specifying the information that is further required by the RTS (ii) costs relating to the ongoing upkeep and maintenance of the information disclosed. ESMA does not consider that the draft regulatory technical standards create any additional costs in respect of how this information is disclosed on the basis that the modalities of this disclosure (on a dedicated section of It is not foreseen that there will be extra costs for ESMA beyond those already foreseen under the level 1 regulation other than the deployment of supervisory resources to monitor compliance with the requirements of the RTS. The benefits proposed by the draft technical standards are predominantly two￾fold. First, they contribute to the European Commission’s initiative for burden reduction and simplification by combining the empowerments under Articles 23(4) and 24(3). In doing they consolidate all disclosures to be made to the public, users of ratings and rated entities in a single regulatory technical standard, while clearly identifying which disclosures are to be made to each category of recipient or reader. Second, they specify the order in which public disclosures should be made in order to ensure that these disclosures

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ESMA84-2037069784-1184 the ESG rating providers website) are already imposed through the level 1 regulation. are logical and coherent, thereby contributing to the regulation’s overarching objective to improve transparency and comparability of ESG ratings where possible. As a result, it can be concluded that the costs imposed by the draft regulatory technical standards are necessary to ensure that the overarching objectives of the regulation are achieved and the disclosures made by ESG rating providers are worthy of the cost and investment necessary for them to be made.

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5.2 Annex II Draft Technical Standards
5.2.1 Draft Regulatory Technical Standard under Article 6(3) and 12(9) of EU
Regulation 2024/3005
COMMISSION DELEGATED REGULATION (EU) 2025/… of XXX supplementing Regulation (EU) 2024/3005 of the European Parliament and of the Council with regard to regulatory technical standards specifying the information contained in the application for authorisation and in the application for recognition of an ESG rating provider (Text with EEA relevance) THE EUROPEAN COMMISSION, Having regard to the Treaty on the Functioning of the European Union, Having regard to Regulation (EU) 2024/3005 of the European Parliament and of the Council of 27 November 2024 on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities, and amending Regulations (EU) 2019/2088 and (EU) 2023/28593 , and in particular Article 6(3), third subparagraph, and Article 12(9), third subparagraph, thereof, Whereas:
(1) In accordance with the general objectives of Regulation (EU) 2024/3005, in particular to enhance transparency and reliability regarding the operations of ESG rating providers, it is appropriate that this Regulation ensures that the information to be submitted to the European Securities and Markets Authority (ESMA) for the purposes of the authorisation and recognition processes of ESG rating providers is sufficient for enabling ESMA to make relevant informed decisions. (2) ESG rating providers that wish to apply for authorisation to provide benchmarks in accordance with Article 16(3) of Regulation (EU) 2024/3005 at the time they apply for authorisation to operate in the Union in accordance with Article 6(1) of that Regulation, shall 3 OJ L, 2024/3005, 12.12.2024.

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ESMA84-2037069784-1184 provide ESMA with additional information, necessary for ESMA to assess compliance with the relevant framework, including [RTS on separation of business]. (3) As part of an application for authorisation or an application for recognition, ESG rating providers should provide sufficient information about members of senior management as such members significant influence over their operations. Such information should thus include proof of the good repute of such members, as an additional guarantee that the ESG rating provider will be in a position to meet its regulatory obligations. In particular, it is necessary to provide ESMA with an official certificate or equivalent evidence from each member of senior management as regards the absence of convictions for certain criminal offences. The official certificate should be sufficiently recent in order to provide an up to date level of assurance and should also cover a sufficiently long period of time. (4) The applicant should provide information about its staffing resources that are directly involved in ESG rating activities. This information should cover the analysts and also staff working to develop and review the ESG rating methodology and who implement and mantain the systems, resources and procedures necessary for ESG rating provider to comply with their obligations under Regulation (EU) 2024/3005. The information provided should be at the level of the team or group of persons performing the activities. (5) In order to provide assurance that an applicant has taken the necessary steps to ensure that the other activities or services it provides do not unduly interfere with or compromise the integrity of its ESG rating activities, the applicant should provide an adequate level of information on the measures put in place in accoradance with Article 16(2) and (3) of Regulation (EU) 2024/3005. (6) Since both the application for authorisation under Article 6(1) of Regulation (EU) 2024/3005 and the application for recognition under Article 12(2) of that Regulation should include the information set out in Annex I thereto, it is appropriate that the present Regulation specifies the shared information requirements in a common annex and, in a separate annex, the additional information to be provided in applications for recognition. (7) To safeguard security and enhance data management and usability in light of increased digitalisation, any information submitted to ESMA in an application should be machine￾readable, thus structured to be easily identified, recognised and extracted by a software application, and provided in a durable medium. (8) To assist ESMA in identifying the documents that an applicant has submitted as part of the application for registration, a unique reference number should be provided to each document.

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(9) For assurance and accountability purposes, an application submitted to ESMA should include a letter signed by a member of the senior management of the applicant, attesting that the submitted information is accurate and complete to the best of that member’s knowledge. (10) Since this Regulation specifies the elements set out in Annex III of Regulation (EU) Regulation (EU) 2024/3005, which applies from 2 July 2026, it is appropriate to align the dates of application of the two Regulations. (11) This Regulation is based on the draft regulatory technical standards submitted to the Commission by ESMA. (12) ESMA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) 1095/2010 of the European Parliament and of the Council4 , HAS ADOPTED THIS REGULATION:
Article 1
Application for authorisation to operate as an ESG rating provider

1. An applicant for authorisation as an ESG rating provider applying to ESMA in accordance
   with Article 6(1) of Regulation (EU) 2024/3005 shall submit the information referred to in
   Annex II of this Regulation in the manner specified in Annex I.
2. An ESG rating provider submitting an application for authorisation for endorsement together
   with an application pursuant to paragraph 1 should additionally submit the information referred to in Annex IV.
3. An ESG rating provider lodging a request to provide benchmarks in accordance with Article
   16(3) of Regulation (EU) 2024/3005 should submit the information referred to in Annex V in addition to the information referred to in paragraph 1.
   Article 2
   4 Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 84).

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Application for recognition of an ESG rating provider established outside the Union An applicant for recognition as an ESG rating provider established outside the Union applying to ESMA in accordance with Article 12(1) of Regulation (EU) 2024/3005 shall submit the information referred to in Annexes II and III of this Regulation in the manner specified in Annex I.
Article 3
Format of the application

1. An applicant shall give a unique reference number to each document it submits. It shall ensure
   that the information it submits clearly identifies to which specific requirement of this Regulation it refers and in which document that information is provided.
2. Applicants shall provide ESMA with the information referred to in Annexes II, III, IV and V
   of this Regulation (EU) in a machine readable format which:
   (a) allows the information to remain accessible for a period of time adequate for the purposes of the application; (b) allows for the unchanged reproduction of the information stored.
3. An applicant shall include in its application a letter signed by a member of the ESG rating
   provider’s senior management, attesting that the submitted information is accurate and complete to the best of the member’s knowledge, as of the date of that submission.
   Article 4
   Number of employees
   Any information regarding number of employees shall be estimated on a full-time equivalent basis calculated as the total hours worked divided by the maximum number of hours subject to compensation within a working year as defined by the relevant national law.
   Article 5
   Policies and procedures

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An applicant shall provide information regarding its policies and procedures under this Regulation by submitting a copy of the relevant policies and procedures.
Article 6
Entry into force and application
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. It shall apply from 2 July 2026. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, For the Commission The President

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ANNEX I
DOCUMENT REFERENCES
Relevant Annex to this
Regulation
Document reference number
Title of the document
Chapter or section or page of the document where the information is provided or
reason why the information is not provided
…
…
…
…

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ANNEX II
INFORMATION TO BE PROVIDED IN AN APPLICATION FOR AUTHORISATION OR RECOGNITION
Part A) - General Information

1. Full name of the applicant.
2. Address of the registered office of the applicant within the Union [EU Member State, city,
   street address, postal code] or address of the registered office of the applicant outside the Union [country, city, street address, postal code], as relevant.
3. Hyperlink to the applicant’s website.
4. Where available, the applicant’s legal entity identifier (LEI) number.
   Part B) – Contact person details
5. Name.
6. Title.
7. Address.
8. Email address.
9. Telephone number.
   Part C) – Legal status
   Proof of the legal status of the applicant such as an excerpt from the relevant commercial or court register, or other equivalent evidence.
   Part D) – Ownership structure
10. Articles of association of the applicant.
11. Ownership structure of the applicant, specifying the percentage of capital, nature of the
    holding (direct or indirect) and percentage of the voting rights of relevant owners.
12. A chart setting out the ownership links between the applicant, its parent undertaking and its
    subsidiaries. All undertakings included in the chart shall be identified by their full legal name.
    Part E) - Activities

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For each undertaking referred to in point 3 of Part D) that carries out ESG rating activities or any of the activities listed in Article 16(1) of Regulation (EU) 2024/3005:
a) the type of activity carried out, indicating whether it is an ESG rating activity or any of the activities listed in Article 16(1) of that Regulation; b) where applicable, the name of the competent authority responsible for supervising the activity concerned.
Part F) - Senior management

1. Organisational chart detailing the applicant’s organisational structure, including a clear
   identification of the role, duties and responsibilities for each member of senior management.
2. For each member of senior management:
   a) name; b) place of birth; c) date of birth; d) role of the members within the senior management of the applicant; e) curriculum vitae showing at least the level of qualification, experience and training; f) a proof of the absence of criminal records relating to money laundering, terrorist financing, provision of financial services or data services, acts of fraud or embezzlement, notably through an official certificate. Where such a certificate is not available in a relevant country, a self-declaration of good repute and the authorisation to ESMA to request such information from the relevant authorities on whether that member has been convicted of a criminal offence in connection with money laundering, terrorist financing, the provision of financial services or data services or in relation to acts of fraud or embezzlement.
   Part G) - Staffing resources
3. The number of rating analysts who are directly involved in ESG rating activities and a
   summary of their overall industry experience, level of training and level of seniority.
4. Excluding the staff listed under point 1, the number of employees and other persons working
   for the applicant that are directly involved in ESG rating activities, together with a summary of industry experience, level of training and level of seniority by area of responsibility, engaged in the following:
   a) the development and review of methodologies or the collection and analysis of data.

ESMA REGULAR USE b) the development, implementation and maintenance of the information technology systems, resources, internal policies and procedures of the ESG rating provider necessary to comply with Regulation (EU) 2024/3005.
Part H) - Expected market coverage

1. The number of ESG rating products that the applicant intends to provide in the Union.
2. For each product listed pursuant to point (1):
   a) name of the product; b) a description of the product; c) the number or expected number of rated items covered;
   Part I) - Procedures and methodologies of ESG ratings
3. For each ESG rating product listed pursuant to Part H, a description of applicable procedures
   and methodologies to issue ESG ratings, including information on:
   a) whether the applicant expects to use information disclosed under Regulation (EU) 2019/2088 of the European Parliament and of the Council5 and Directive 2013/34/EU of the European Parliament and of the Council6 ; and, b) whether the applicant expects to use methodologies that are based on scientific evidence and takes into account the targets and objectives of the Paris Agreement or any other relevant international agreements.
4. Procedures for the review of ESG ratings.
5. Procedures for the review of ESG rating methodologies.
   Part J) - Policies or procedures to identify, manage and disclose conflicts of interest
   The policies and procedures referred to in Article 15 of Regulation (EU) 2024/3005, including the following information:
   5 Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (OJ L 317, 9.12.2019, p. 1). 6 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

ESMA REGULAR USE a) a description of internal reporting channels for receiving and handling information provided by persons reporting actual or potential breaches and for ensuring the protection of such persons’ identity; b) the review and approval process for the onboarding of new clients, employee personal account dealing, outside business activities and the acceptance of gifts and hospitality; c) the criteria to determine the remuneration of the persons referred to in Part G; d) the terms of reference for the management body as defined in Article 3(11) of Regulation (EU) 2024/3005.
Part K) - Outsourcing arrangements
Where applicable, documents and information related to any existing or planned outsourcing arrangements for activities covered by Regulation (EU) 2024/3005, including:
a) the outsourcing policy or other documents demonstrating compliance with the requirements of Annex II point 2 of that Regulation; b) a copy of any existing outsourcing agreements.
Part L) – Other activities
Where applicable, information about the applicant’s other commercial activities, including the name and description of any other business activities carried out by the applicant, or which the applicant intends to carry out and, where applicable, the name of the competent authority responsible for supervising such activities.
Part M) – Specific measures implemented by the applicant

1. For any activities referred to in Article 16(1), (c), (d) and (f) of Regulation (EU) 2024/3005,
   information regarding the specific measures that the applicant has put in place in accordance with [RTS on Separation of Business]:
2. An explanation as to why the measures referred to in point 1) are deemed sufficient by the
   applicant.
   Part N) – Previous ESG rating activities
   Where applicable, information about previous ESG rating activities, including:
   a) any relevant licences held, indicating their periods of validity; b) any ESG rating products previously provided which are not listed under Part H;

ESMA REGULAR USE c) the name of the legal entity under which such activities were carried out; d) where appliable, name of the authority responsible for supervising such activities.
ANNEX III
ADDITIONAL INFORMATION TO BE PROVIDED IN AN APPLICATION FOR RECOGNITION
Part A) - Legal representative in the Member State of reference
With respect to the legal representative referred to in Article 12(3) of Regulation (EU) 2024/3005:
a) Full name; b) the Legal Entity Identifier, where available; c) articles of incorporation, articles of association or other constitutional documents; d) information on whether it is supervised and the name of the supervisory authority; e) written confirmation of the authority of the legal representative to act on behalf of the applicant in accordance with Article 12(3) of Regulation (EU)2024/3005; f) the name, title, address, email address and telephone number of a contact person within the legal representative.
Part B) – Information on compliance measures
As regards compliance with the requirements of Regulation (EU) 2024/3005, ESG rating providers shall provide:
a) an assessment by the legal representative of the adequacy of the measures put in place by the ESG rating provider; b) a description of the measures put in place by the legal representative to monitor compliance on an on-going basis.
Part C) - Information on turnover
For each of the last three consecutive years:

ESMA REGULAR USE a) a copy of the ESG rating provider’s annual financial reports, for the last three consecutive years, including individual and consolidated financial statements, where applicable. b) where the financial statements referred to in point (a) are subject to external independent audit, the financial reports shall be accompanied by the audit reports on the annual and consolidated financial statements; c) where no audit reports as referred to in point (b) are available, the financial reports shall be accompanied by an assessment by an independent external auditor or certification of the competent authority of the third country where the ESG rating provider is established of the annual net turnover of all of its activities.
Part D) – Information on ESG ratings intended to be distributed in the Union
The list, in .csv format, of actual or prospective ESG ratings which at the date of application are intended for publication or distribution in the Union.
Part E) – Information on activities outside the Union
Where applicable, with reference to activities outside the Union:
a) Name of third country authority; b) address of third country authority; c) activity for which applicant was licenced or supervised; d) respective dates for which applicant was licensed or supervised.
ANNEX IV
ADDITIONAL INFORMATION TO BE PROVIDED IN THE CONTEXT OF ENDORSEMENT OF ESG RATINGS Indication of whether the ESG rating provider is requesting authorisation to endorse ESG ratings provided by an ESG Rating provider established outside the Union in accordance with
Article 11(1), point (a) of Regulation (EU) 2024/3005, and if so, for each expected
endorsement:
a) The name, and where available, LEI, of the legal entities from which ratings will be endorsed;

ESMA REGULAR USE b) the information required under Part H, Annex II of this Regulation for each ESG rating product to be endorsed; c) objective reasons for the endorsement of each ESG rating product; d) the measures put in place by the ESG rating provider to ensure compliance with
Article 11(1) of Regulation (EU) 2024/3005.
ANNEX V
ADDITIONAL INFORMATION TO BE PROVIDED IN A REQUEST TO ESMA TO BE AUTHORISED TO PROVIDE BENCHMARKS (a) Indication of whether the ESG rating provider is requesting to be authorised to provide benchmarks in accordance with Article 16(3) of Regulation (EU) 2024/3005 and, if so:

1. The specific measures that the applicant has put in place in accordance with [Article 3 of
   RTS on Separation of Business];
2. an assessment as to why the measures referred to in point 2) are deemed sufficient by the
   applicant;
3. information on whether the ESG Rating Provider provides or intends to provide benchmarks
   that pursue sustainability objectives, in particular EU Climate Transition Benchmarks and EU Paris-aligned benchmarks in accordance with Regulation (EU) 2016/1011.

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5.2.2 Draft Regulatory Technical Standard under Article 16(5) of EU Regulation
2024/3005
COMMISSION DELEGATED REGULATION (EU) 2025/… of XXX supplementing Regulation 2024/3005 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the measures and safeguards to be implemented by ESG rating providers in relation to the separation of business and activities (Text with EEA relevance) THE EUROPEAN COMMISSION, Having regard to the Treaty on the Functioning of the European Union, Having regard to Regulation (EU) 2024/3005 of the European Parliament and of the Council of 27 November 2024 on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities, and amending Regulations (EU) 2019/2088 and (EU) 2023/2859, and in particular Article 16(5), third subparagraph thereof, Whereas:
(1) ESG rating providers should ensure that employees who are directly involved in the assessment process of rated items have clearly delineated roles and responsibilities and are assigned to distinct structures within the organisation, in order to avoid the creation of conflicts of interest that could arise if such critical staff of the ESG rating provider were to be involved in any of the activities mentioned in Article 16(1) of Regulation (EU) 2024/3005. To prevent the inadvertent flow of sensitive information within different structures or business areas and activities, ESG rating providers should also apply physical separation measures, such as assigning dedicated workspaces to rating analysts, distinct from those of other employees of the ESG rating provider involved in the activities referred to in Article 16 of Regulation (EU) 2024/3005. (2) In order to adequately preserve the independence of the rating process, ESG rating providers already engaged or intending to engage in investment services and activities, activities of credit institutions and insurance or reinsurance activities should have in place additional safeguards in the form of information security and network-related controls, internal policies and procedures, training, contractual measures and compliance monitoring checks, such as reviewing communications of employees involved in the assessment process of a rated item.

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(3) An ESG rating provider intending to engage in the provision of benchmarks through the same legal entity should complement organisational, physical, technical and internal control measures with additional safeguards in relation to the remuneration and compensation arrangements of employees or other persons directly involved in the assessment process, the production and offering of ESG ratings, as well as pre￾contractual arrangements aiming to identify actual or potential conflicts of interest. (4) Since this Regulation specifies the elements set out in Annex III of Regulation (EU) Regulation (EU) 2024/3005, which applies from 2 July 2026, it is appropriate to align the dates of application of the two Regulations. (5) This Regulation is based on the draft regulatory technical standards submitted by ESMA to the European Commission. (6) ESMA conducted open public consultations on the draft regulatory technical standards on which this Regulation is based and analysed the potential related costs and benefits and requested the advice of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council2 , HAS ADOPTED THIS REGULATION:
Article 1
Measures and safeguards in relation to the activities referred to in Article 16(1) of Regulation (EU) 2024/3005 ESG rating providers shall:
a) Put in place decision-making procedures and organisational structures which specify reporting lines and allocate functions and responsibilities in a manner that ensures that employees directly involved in the assessment process of a rated item are not involved in any of the activities referred to in Article 16(1) of Regulation (EU) 2024/3005; b) implement physical separation measures that safeguard the independence of ESG rating activities and ensure impartial decision-making by employees and other persons directly involved in the assessment process of a rated item; c) ensure that employees and other persons directly involved in the assessment process of a rated item submit once every 12 months a self-declaration stating that they do not provide any of the activities referred to in Article 16(1) of Regulation (EU) 2024/3005.
Article 2

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Measures and safeguards in relation to the activities referred to in points (d) and (f) of
Article 16(1) of Regulation (EU) 2024/3005

1. When involved in the activities listed in points (d) or (f) of Article 16(1) of Regulation (EU)
   2024/3005, ESG rating providers shall implement the following measures:
   a) Digital controls providing for role-based access; b) information controls that enable watermarking methods and data classification levels; c) policies and procedures for managing confidential information; d) regular employee training on the importance of information barriers; e) contractual obligations requiring employees to comply with internal policies throughout their employment; f) compliance monitoring activities to identify conflicts of interest.
2. ESG rating providers shall perform an assessment of the adequacy of the measures
   implemented pursuant to paragraph 1 at least once every 24 months. The management body shall approve the outcome of this assessment.
   Article 3
   Specific measures and safeguards in relation to the activity referred to in point (c) of
   Article 16(3) of Regulation (EU) 2024/3005
   ESG rating providers involved in the provision of benchmarks as defined in Article 3(1), point (5), of Regulation (EU) 2016/1011 authorised by ESMA to provide benchmarks within the meaning of Article 16(3) of Regulation (EU) 2024/3005 shall implement the measures set out in Article 2 and adopt the following additional safeguards:
   a) measures to ensure that the compensation and performance evaluation arrangements applicable to employees and other persons directly involved in the assessment process of a rated item are not affected by actual or potential conflicts of interest originating from the ESG rating provider’s involvement in the activity of benchmarks provision; b) arrangements to ensure that the production and offering of ESG ratings does not rely on a mechanistic use of the constituents or output of a benchmark for which the ESG rating provider is the administrator; c) performance and documentation of an assessment of the existence of any actual or potential conflicts of interest before entering into a contract for the provision of services to a rated

ESMA REGULAR USE item, issuer of a rated item or an investor who has an established client relationship with the ESG rating provider or, where applicable, a member of its group.
Article 4
Entry into force and application
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. It shall apply from 2 July 2026. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, For the Commission The President

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5.2.3 Draft Regulatory Technical Standard under Articles 23(4) and 24(3) of EU
Regulation 2024/3005
COMMISSION DELEGATED REGULATION (EU) 2025/… of XXX supplementing Regulation (EU) 2024/3005 of the European Parliament and of the Council with regard regulatory technical standards specifying the elements to be disclosed to the public and to users of ESG ratings, rated items and issuers of rated items (Text with EEA relevance) THE EUROPEAN COMMISSION, Having regard to the Treaty on the Functioning of the European Union, Having regard to Regulation (EU) 2024/3005 of the European Parliament and of the Council of 27 November 2024 on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities, and amending Regulations (EU) 2019/2088 and (EU) 2023/2859 (Text with EEA relevance)7 , and in particular Articles 23(4), third subparagraph, and Article 24(3), third subparagraph, thereof, Whereas:
(1) Recognising that ESG rating providers may offer multiple ESG rating products, it is important that they provide sufficient information to the public, users, rated items and issuers of rated items in relation to each ESG rating product. A sufficient level of disclosures is deemed appropriate to ensure transparency, enable due diligence and facilitate cross-comparison with other ESG rating products. This should allow a better understanding of the characteristics of such products and enable the public, users, rated items and issuers or rated items to identify those ESG rating products that best meet their needs. (2) In particular, the availability on the website of the ESG rating provider of comprehensive elements concerning methodologies, models and key rating assumptions supporting ESG rating activities is important to foster transparency at the level of each ESG rating product. To that end, ESG rating providers should disclose the relevant information to the public in the sequence set out in the Annex to this Delegated Regulation so as to facilitate comparison. 7 OJ L, 2023/2631, 30.11.2023.

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(3) Given that the disclosures to be made available to users of ESG ratings, rated items and the issuers of rated items are complementary to those intended for the public it is appropriate to consolidate in a single regulation the empowerments set out in Article 23(4) and Article 24(3) of Regulation (EU) 2024/3005 in a single regulation. At the same time, this Delegated Regulation clearly distinguishes, in separate articles, the specific disclosures to be made to each category of relevant parties. (4) Since this Regulation specifies the elements set out in Annex III of Regulation (EU) Regulation (EU) 2024/3005, which applies from 2 July 2026, it is appropriate to align the dates of application of the two Regulations. (5) This Regulation is based on the draft regulatory technical standards submitted to the Commission by ESMA. (6) ESMA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council8 , HAS ADOPTED THIS REGULATION:
Article 1
Specification of disclosure elements
ESG rating providers shall ensure that the information to be disclosed pursuant to points 1 and 2 of Annex III to Regulation (EU) 2024/3005 includes the elements specified in this Delegated Regulation.
Article 2
Presentation of information

1. ESG rating providers shall ensure that the information to be disclosed pursuant to point 1
   of Annex III to Regulation (EU) 2024/3005 is presented in accordance with the order set out in the Annex to this Delegated Regulation.
2. In fulfilling the requirement referred to in point 1 ESG rating providers may cross-reference
   to the relevant information made available on their website, including via hyperlinks or other appropriate technological means.

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Article 3
Rating product disclosures

1. As part of the information referred to in point 1, letter (f) of Annex III to Regulation
   (EU) 2024/3005, ESG rating providers shall disclose at the level of each ESG rating product:
   (a) a description of the risks covered, where the ESG rating is assessing risks; (b) a description of the impacts covered, where the ESG rating is assessing impacts; (c) information on how the risk and impact materiality are taken into account according to the double materiality principle, where applicable; (d) where the ESG rating is based on other materiality dimensions, a description of those dimensions.
2. As part of the information referred to in point 1, letter (g) of Annex III to Regulation
   (EU) 2024/3005, ESG rating providers shall disclose at the level of each ESG rating product:
   (a) a description of what is covered under the E, S or G factors and which factors are aggregated, where applicable; (b) a description of the specific issues that the ESG rating covers.
3. As part of the information referred to in point 1, letters (o) and (p) of Annex III to
   Regulation (EU) 2024/3005, ESG rating providers shall at the level of each ESG rating product, where applicable:
   (a) include an indication of whether the ESG rating takes into account the targets and objectives of the Paris Agreement and which other international agreements are considered, with reference to basic identifying information on these agreements together with an explanation of their relevance to the ESG rating; (b) specify whether the ESG rating is assessing alignment of commitments against the objectives of the agreements referred to in point (a).
   Article 4
   General methodological disclosures

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1. As part of the information referred to in point 1, letter (a), of Annex III to Regulation (EU)
   2024/3005, ESG rating providers shall disclose:
   (a) the title of the rating methodology used;
   (b) a description of the types of rated items in relation to which the methodology referred to in point (a) applies; (c) the time horizon over which the ESG rating is considered valid, where applicable (d) a list and overview of the relevant supporting models and key rating assumptions, where applicable; information on measures and procedures to ensure the quality and reliability of data used; (e) a description of the defined ranking system of rating categories used, with reference to:
   i. the meaning of each rating category for absolute and relative values and how the
   ranking system should be interpreted;
   ii. in the case of relative values, an explanation as to whether they are relative to a
   specific industry, geographical area, peer groups or other comparative references and their respective description. (f) the dates of the most recent update of the methodology and a description of the changes introduced to the previous version.
2. As part of the information referred to in point 1, letter (b) of Annex III to Regulation (EU)
   2024/3005, ESG rating providers shall provide:
   (a) the name of the issuing body of the industry classification used; (b) the name and version of the industry classification used; (c) any publicly available link to the official documentation of the industry classification system.
3. As part of the information referred to in point 1, letter (c) of Annex III to Regulation (EU)
   2024/3005, ESG rating providers shall include a description of the engagement process with rated items or issuers of rated items, including how the input from such engagement is taken into account.
4. As part of the information referred to in point 1, letter (e) of Annex III to Regulation (EU)
   2024/3005, ESG rating providers shall where applicable, describe the process for identifying relevant scientific evidence.

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Article 5
Limitations in data sources, methodologies and information As part of the information referred to in point 1, letters (m) and (q) of Annex III to Regulation (EU) 2024/3005, ESG rating providers shall explain any limitations in respect of the following:
(a) the availability or consistency of data used in the rating process; (b) the completeness, timeliness and accuracy of information; (c) the use of assumptions, proxy reference points and data estimation.
Article 6
Organisational disclosures

1. As part of the information referred to in point 1, letter (n) of Annex III to Regulation
   (EU) 2024/3005, ESG rating providers shall indicate the areas of the ESG rating provider’s activities, services or organisational structure from which the main risks of conflicts of interest may arise.
2. As part of the information referred to in point 1, letter (d) of Annex III to Regulation
   (EU) 2024/3005, ESG rating providers shall disclose:
   (a) a chart illustrating their ownership links with any parent undertaking and subsidiaries. The chart shall indicate, where applicable, whether any of those entities perform any of the activities listed in Article 16 (1) or services referred to in Article 16(6) of Regulation (EU) 2024/3005.
3. As part of the information referred to in point 1, letter (l) of Annex III to Regulation
   (EU) 2024/3005, ESG rating providers shall disclose the following:
   (a) how the criteria they apply for establishing fees ensure that fees are fair, reasonable, transparent and non-discriminatory in accordance with Article 27 of Regulation (EU) 2024/3005; (b) whether the ESG rating provider operates a subscription-paid model, an issuer-paid model, a combination of those models, or another model; (c) a description of the relevant business model, and the proportion of total annual revenue derived from each model;

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(d) where applicable, the impact of fees charged for services other than ESG rating activities on the determination of fees for ESG ratings, together with a description of those other services.
Article 7
Specific Methodological Disclosures

1. As part of the information referred to in point 2, letter (b), subpoint (i) of Annex III to
   Regulation (EU) 2024/3005, ESG rating providers shall specify the methods used to collect any non-public data.
2. As part of the information referred to in point 2, letter (a), subpoint (iv) of Annex III to
   Regulation (EU) 2024/3005, ESG rating providers shall disclose a description of any potential shortcomings relating to the use of preestablished statistical or algorithmic systems or models in ESG measures.
   Article 8
   Revision of data and methodologies
3. As part of the information referred to in point 2, letter (a), subpoint (v) of Annex III to
   Regulation (EU) 2024/3005, ESG rating providers shall provide an explanation of the following items:
   (a) the process and frequency for revising methodologies; (b) the conditions for determining the need for revising a methodology; (c) where applicable, the procedure for stakeholder consultation during the revision process; (d) the process for assessing the potential impact of the revision of methodologies on ESG ratings produced pursuant to the relevant methodology; (e) the criteria for determining what constitutes a material change to a methodology.
4. As part of the information referred to in point 2, letter (b), subpoint (iii) of Annex III to
   Regulation (EU) 2024/3005, ESG rating providers shall explain the steps taken to ensure the accuracy and consistency of the data revision process.
5. As part of the information referred to in point 2, letter (a), subpoint (vii) of Annex III to
   Regulation (EU) 2024/3005, ESG rating providers shall specify the version number of the methodology.

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Article 9
Entry into force and application
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. It shall apply from 2 July 2026 This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, For the Commission The President
Annex
Table 1
List of elements to be disclosed pursuant to Annex III, point 1, of Regulation (EU) 2024/3005
Annex III.1 Delegated
Regulation
Rating Product
Disclosures
Annex III.1.f Article 3(1)
Annex III.1.g Article 3(2)
Annex III.1.h N/A
Annex III.1.i N/A
Annex III.1.j N/A
Annex III.1.o Article 3(3)
Annex III.1.p Article 3(3)
Basic Methodological
Disclosures
Annex III.1.a Article 4(1)
Annex III.1.b Article 4(2)
Annex III.1.c Article 4(3)
Annex III.1.e Article 4(4)
Annex III.1.k N/A
Limitations in data sources, methodologies and information
Annex III.1.m Article 5
Annex III.1.q Article 5
Organisational
Disclosures
Annex III.1.d Article 6(2)
Annex III.1.l Article 6(3)
Annex III.1.n Article 6(1)

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5.3 Annex III List of Questions
Q1 Do you agree with ESMA’s proposals for the draft technical standard under Articles 6(3) and 12(9)? Q2 Do you agree with ESMA’s proposals for the draft technical standard under Article 16(5)? Q3 Do you agree with ESMA’s proposals for the draft technical standard under Articles 23(4) and 24(3)? Q4 Do you consider that the draft technical standards under Articles 23(4) or 24(3) should instead provide an expanded table in Annex proposing a sequence and structure for all disclosures to be made under parts 1 and 2 of Annex III? If yes, please explain the benefits of such an approach. Q5 Do you agree with ESMA’s proposed cost benefit analysis? If not, please explain.

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5.4 Annex IV Securities Markets Stakeholder Group Advice to ESMA
Advice to ESMA
SMSG advice to ESMA on its consultation paper on draft technical standards under the Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities Executive Summary The SMSG welcomes the opportunity to comment on to ESMA’s Consultation Paper (CP) on the draft technical standards (the RTS) under the Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities (the Regulation). The SMSG welcomes the simplification approach taken by ESMA, but notes that there may be room for even more simplification. The SMSG would like to see further analysis done to determine if the right information is requested, for whom such information would be useful, and how information once provided would have to be updated. The SMSG in this advice gives some examples of where information requirements relating to ESG analysts and methodology may be reconsidered, modified or taken out. The SMSG also asks for further clarity about the applicability and rules relating to SMEs and start-ups as well as to outsourcing. The SMSG questions the reference to “scientific methodology” and notes the risks with including such reference. The SMSG would further like to see more clarity around certain definitions used, as well as on what applies in areas where there is (not yet) an established scientific methodology, but where there may be “standards” or similar. The SMSG notes that users of ESG ratings may be interested in learning what weight an ESG rating provider gives to certain factors or data. The SMSG also raise the concern amongst rated companies that ESG rating providers do not communicate with them and that providers fail to correct information that is not correct. The SMSG therefor ask ESMA to consider if more can be done to improve data-verification within timeframes to be determined by ESMA and methodological transparency for ESG rating providers, so as to bolster the reliability and impartiality of their published ratings. The SMSG notes that reviews are presently ongoing of several other ESG related regulatory frameworks incl. the CSRD and would like some further clarity on what the implications of such reviews may have on the Regulation and the forthcoming RTS.

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Introductory remarks

1. on the draft technical standards (the RTS) under the Regulation on the transparency and
   integrity of Environmental, Social and Governance (ESG) rating activities (the Regulation).
2. The SMSG welcomes the simplification approach taken by ESMA, in that one RTS covers
   several areas and that ESMA takes a “building blocks” approach on the information side.
3. This said the SMSG notes that there may be room for even more simplification as it can be
   questioned if all information requested is needed. Further analysis is also required to determine if the right information is requested, for whom such information would be useful, and how information once provided would have to be updated. The SMSG welcomes the opportunity to comment on to ESMA’s Consultation Paper (CP). .Information requirements
4. As regards the information that is proposed to be provided by ESG rating providers, the
   SMSG questions the usefulness of all details regarding ESG analysts employed by the ESG rating provider. While it is useful for a user or ratings to learn e.g. if the provider is a small “boutique” or a global firm, we wonder why details of all analysts etc.is needed and if so for what purpose.
5. The SMSG finds that if details of all analysts are provided, it may put undue pressure on
   the individual analysts. A question in this regard is here to what extent such information would be made public and if/how often this information would have to be updated. SMEs and start-ups in the rating sector
6. The SMSG notes that further clarity could be provided if and if so to what extent the rules
   set out in the draft RTS will apply to SMEs and start-ups. As the rules are drafted they seem to imply that the ESG rating provider already has an operation up and running, as details seem to have to be provided about existing operations and does not leave room for presenting such information in the form of business plans etc.

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Methodology
5. As regards the requirements to provide information about methodology, the SMSG
considers that a balance must be struck between such proprietary information as a provider has a legitimate interest in keeping inhouse, and transparency towards the users of ESG ratings.
6. The SMSG also questions the reference to “scientific methodology” and would like to see
further clarity on what applies in areas where there is (not yet) an established scientific methodology, but where there may be “standards” or similar.
7. In connection with the above, the SMSG sees a risk that ESG rating providers may be
tempted to refer to a “scientific methodology” where no such methodology exists, creating an illusion.
8. The draft RTS also refers to “updates” or “changes” of methodologies, but it is not clear
when (within what timeframe) and to what extent ESG rating providers must provide information about updates.
9. It could e.g. be questioned how significant a change must be to require an “update” or
“change” and it is unclear who takes the decision on when an “update” is needed, and prop what the consequences are if no “update” is provided.
10. Example: Would a change (or not) of an approach/a view from a human rights perspective
on a country be an “update” or “change” of methodology by an ESG rating provider - this may be a very important matter for some users.
11. The SMSG also notes that users of ESG ratings may be interested in learning what weight
an ESG rating provider gives to certain factors or data, so that they can consider this in their own use of the rating. Relationship with rated companies
12. The SMSG notes that there is a concern amongst rated companies that ESG rating providers
do not communicate with them and that providers fail to correct information that is not correct. Against this background, the SMSG would like to ask ESMA to consider if more can be done to improve data-verification within timeframes to be determined by ESMA and methodological transparency for ESG rating providers, so as to bolster the reliability and impartiality of their published ratings.

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Outsourcing
13. The SMSG notes that it is unclear if and to what extent rules apply in the case of outsourcing
requirements and would like to see further clarity on this matter.
Interaction with other regulatory frameworks
14. The SMSG notes that reviews are presently ongoing of several other ESG related regulatory
frameworks incl. the CSRD and would like some further clarity on what the implications of such reviews may have on the Regulation and the forthcoming RTS.
15. This advice will be published on the Securities and Markets Stakeholder Group section of
ESMA’s website.
Adopted on 24 June 2025
[Signed] [Signed]
Giovanni Petrella Urban Funered
Chair Rapporteur
Securities and Markets
Stakeholder Group