SIFMA AMG Cautions against Over-Reliance on ESG Ratings

In its response to a European Securities and Markets Authority ("ESMA") Consultation on ESG Ratings Providers, SIFMA AMG requested that ESMA make a clear distinction between ESG Ratings and ESG Data.

SIFMA AMG stated that ESG Ratings and ESG Data have different market uses. The association explained that "ESG data is used as an input by asset managers and other financial services firms for the purposes of measuring, tracking and reporting on the sustainability impacts or adverse impacts of their / their investments’ business activities. ESG ratings, on the other hand, are primarily used by investors and our clients to compare and rate different products from an ESG perspective." The association noted that "our clients may ask us to report on the ESG performance of their managed portfolio by reference to an ESG rating selected by them."

SIFMA AMG cautioned against an over-focus on ESG Ratings and warned against building too heavy a reliance on them.

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