The European Commission’s proposal for an ESG rating regulation should extend to ESG data to fulfil the “urgent need”, PensionsEurope and Insurance Europe have stated.

Although the two associations think the proposed regulation will significantly enhance transparency in ESG ratings, they believe the proposal needs to go further.

“Importantly, insurers and pension providers support the initiative’s aim of improved ESG rating providers’ independence and a reduction in potential conflicts of interest. However, while acknowledging the positive aspects of these measures and their role in ensuring and promoting a competitive market, further improvements are necessary to advance transparency, comparability and integrity within the ESG landscape,” the joint statement said.

“Most importantly, the regulation should extend to ESG data itself. In the context of fulfilling sustainable finance obligations, the need for consistent and robust ESG data cannot be overstated. The absence of a comprehensive public database poses serious challenges for both the insurance and investment industries.”

Therefore, the European insurance and pensions industries call on the co-legislators to include ESG data products in the scope of the regulation to address the broader ESG data challenges and ensure the integrity of the ESG landscape.

“There is an urgent need for the availability and transparency of ESG data to be improved, not only to fulfil regulatory requirements but, more importantly, to reallocate capital to sustainable assets,” the association said.

They noted that, although helpful, the Corporate Sustainability Reporting Directive (CSRD) and the European Single Access Point (ESAP) are still a number of years from being fully implemented and operational.

“The current situation necessitates continued reliance on purchased ESG data services, so attaining comprehensive coverage of reporting entities and common definitions and data points will be a gradual process. Introducing a review clause proposing to consider expanding the scope to ESG data providers will, therefore, not be sufficient to address current and foreseeable data-gap problems. A solution is, therefore, needed now to support the financial green transition.”

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