The sustainable finance approach continues to permeate, without exception, every nook and cranny of the regulatory and supervisory framework of the international financial system, as well as the perception of stakeholders, particularly investors.

As manifestations of the above we can show the examples of the <a href = “ ECB-supervisory-expectations / “> ECB Guide on risks related to climate and the environment </a> (November 2020), or the <a href =” -of-larry-fink-of-2021-and-the-asg-factors / “> BlackRock’s renewed statement of intent </a> (January 2021).

It is possible that within financial institutions there is an awareness of this wave of change, but, from an operational point of view and the effective implementation of the machinery necessary for the transformation, the challenges remain enormous and ongoing. largely unknown.

If to this we add the difficulties of financial regulators to meet their commitments on time, the uncertainties are even greater [for example, on March 10, Regulation (EU) 2019/2088, of the European Parliament and of the Council, will enter into force , of November 27, 2019, on the disclosure of information related to sustainability in the financial services sector, without the support of the implementing rules that should have been previously approved by the European Commission, based on the work of the European Supervisory Authorities].

<a href=””> On January 28, 2021, ESMA sent a letter to the European Commission < / a>, warning, on this occasion, about the need to regulate and supervise companies that issue ESG ratings: “I would like to address the unregulated and unsupervised nature of the market for” ESG “ratings and ESG assessment tools and the need to match the growth in demand for these products with appropriate regulatory requirements to ensure their quality and reliability ”.

According to the ESMA, unlike the credit ratings related to the financial robustness of the entities and the issued assets, which are more or less homogeneous, the ESG ratings show low levels of correlation between the different providers.

Furthermore, it is significant that some companies in highly polluting industries obtain high ESG ratings from some suppliers, which can lead to confusion among investors (“Similarly, the fact that companies in highly polluting industries can obtain high environmental scores from some ESG rating providers can lead to investor confusion and highlights the need for greater transparency and the development of standardized definitions ”).

It may be necessary to point out that, in order to put into context, in addition to the situation at the time of issuance of the ESG opinion, it is necessary to weigh the plans of the company in question for the transition to a low-carbon economy, with an eye on in 2050 or 2060 (see, in this regard, <a href=””> Larry Fink’s letter to the CEOs of January 2021 </a>).

The ESMA, being aware of the difficulty of preparing a legislative proposal on this matter, suggests some guidelines:

1) Application of the principle of proportionality, so as not to restrict the activity of the smaller and more innovative entities that provide ESG ratings.

2) Legal definition of “ESG rating”, suitable for both issuers and the issues themselves.

3) Registration and supervision of companies engaged in the development of this activity.

4) ESG ratings based on updated, reliable and transparently obtained data, developed in accordance with robust methodologies, open to critical analysis by investors.

5) In the case of large entities that issue ESG ratings, additional requirements that affect their own internal organization and the prevention of conflicts of interest.

In this way, the risks of green laundering and an inappropriate location of capital can be minimized, as well as conflicts of interest and the inappropriate sale of financial products.

Finally, the ESMA suggests that the regulation of credit rating companies [Regulation (EC) 1060/2009, of the European Parliament and of the Council, of September 16, 2009, on credit rating agencies] could be a safe harbor for begin navigating these unexplored waters, and offers to become the new supervisor in this area.

As you can see, challenge after challenge, with limited time and resources, public and private.

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Aguado Correa, F., and De la Vega Jiménez, J. J. (20

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