The European Securities and Markets Authority (ESMA) published a consultation paper on 29 April 2026, seeking feedback on draft guidelines for endorsement under Article 11 of the ESG Rating Regulation. The guidelines aim to clarify the conditions under which ESG ratings from third-country providers can be endorsed for use in the EU, impacting rating providers, investors, and regulated entities that rely on such ratings.
Document details and purpose
ESMA, as the EU's securities markets regulator, issued the consultation paper to specify the procedural and substantive requirements for endorsement, including due diligence, monitoring, and reporting obligations. The document is a consultation paper, meaning it proposes non-binding guidance but carries significant weight for market participants seeking compliance with the regulation.
Key proposals
The draft guidelines outline that endorsing entities must verify that the third-country rating provider meets standards equivalent to EU requirements, covering governance, transparency, and conflict-of-interest management. ESMA proposes that endorsers conduct initial and ongoing assessments, maintain records, and notify ESMA of any material changes. The consultation also addresses the scope of endorsement, including partial endorsement and the treatment of ratings for ESG factors.
Trade-offs and policy orientations
The guidelines balance market access for global ESG ratings with investor protection and regulatory consistency. By allowing endorsement, ESMA facilitates the use of non-EU ratings, supporting international capital flows and reducing costs for EU firms that rely on global benchmarks. However, the requirements impose compliance costs on endorsing entities, particularly smaller providers, and may limit the availability of niche or innovative ratings if third-country providers cannot meet EU standards. The consultation seeks to calibrate these trade-offs, with ESMA inviting comments on proportionality and the definition of equivalent standards.
Stakeholder impact
ESMA's proposals affect several stakeholders. EU-regulated entities using endorsed ratings will benefit from clearer compliance pathways and reduced legal uncertainty, but may face higher costs if endorsers pass on due diligence expenses. Third-country ESG rating providers could gain easier access to the EU market through endorsement, but must adapt to EU-equivalent standards, potentially increasing operational costs. EU-based rating providers may face increased competition from endorsed ratings, but also benefit from a level playing field if endorsement conditions are stringent. Investors and asset managers will have more confidence in the quality and comparability of endorsed ratings, supporting informed decision-making.
Expected institutional follow-up
The consultation is open for comments until 29 July 2026. ESMA will consider feedback before finalising the guidelines, which are expected to be adopted in late 2026 or early 2027. The guidelines will complement the ESG Rating Regulation, which entered into force in 2025, and will be subject to review by the European Commission as part of the broader sustainable finance framework.