The New EU Regulation on ESG Ratings: What Companies Need to Know Now

Starting in July 2026, an EU regulation will take effect that imposes stricter regulations on ESG rating providers. The new regulation promises greater transparency, comparability, and trust—but it also entails obligations that companies should understand early on. In this article, we explain what is changing, what the timeline is, and why it is also worthwhile for rating users—such as companies assessed by CDP, EcoVadis, or B Corp—to take a closer look now.

Why is regulation of ESG ratings necessary?

ESG ratings are rapidly gaining importance—whether for communicating with investors, managing supply chains, or assessing sustainability risks. Until now, however, the market has been largely unregulated. Differing methodologies, a lack of transparency, and potential conflicts of interest have cast doubt on their reliability.

Regulation (EU) 2024/3005 on ESG rating activities, adopted in December 2024, now provides clarity—with the aim of making ESG ratings a credible and reliable tool in the sustainable finance market. The objectives are as follows:

• to avoid conflicts of interest by separating ESG ratings from other business activities,
• to introduce ESMA supervision and a licensing requirement for credit rating agencies—including those based in third countries,
• and to define detailed disclosure requirements for users of ESG ratings.

What exactly is being regulated?

The new regulation introduces, for the first time, a uniform definition, clear requirements, and a binding legal framework for ESG rating providers in the EU. The aim is to improve the quality and reliability of ESG ratings while avoiding conflicts of interest.

Specifically, the following provisions apply:

• What an ESG rating is: An assessment or score based on environmental, social, or governance factors, regardless of whether the “ESG” label is used
• Who is affected: Credit rating agencies based in the EU or third countries, provided that their ratings are publicly available or distributed to regulated financial market participants in the EU
• Exclusions: Internal ratings, ESG data without a rating, ESG labels without ratings, or products already subject to regulation, such as green bonds

Given the broad definition and the focus on “rating through analysis,” existing rating models could also be indirectly affected—even if they are not currently labeled as “ESG ratings.”

The schedule: What happens when?

The regulation was adopted at the end of 2024, will formally enter into force in early 2025—and will become mandatory in mid-2026. In the meantime, the European Securities and Markets Authority (ESMA) is working on technical standards that will specify the details of implementation. Companies should be aware of the timeline so they can respond in a timely manner. For a clearer overview, we have summarized the most important dates and transition periods for you:

In the meantime, ESMA (the European Securities and Markets Authority) will develop technical standards (“RTS”) to further clarify the specific requirements. A consultation on this matter is currently underway—so companies still have the opportunity to provide input.

What specific changes will there be for providers and users?

The ESG Rating Regulation affects not only rating providers but also companies that rely on such ratings—whether for communications, investor relations, or procurement. That is why it is important to understand both perspectives. The following overview provides a concise summary of the requirements that will apply to ESG rating providers and users in the future:

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Future requirements for ESG rating providers (non-exhaustive)

• Requirement for authorization by ESMA
• Publication of methodologies, data sources, weightings, and assumptions
• Separation of ESG ratings from advisory services, auditing, benchmarking, and banking (to avoid conflicts of interest)
• Independence of analysts
• Provision of separate E, S, and G ratings (rather than blanket ESG scores)
• Strict oversight and penalties for violations, including fines of up to 10% of annual revenue

Requirements for companies

Companies that use ESG ratings for communication or strategic purposes will also be subject to indirect obligations in the future, including the disclosure of the ratings used, as well as:

• Purpose of the rating and methodology used
• ESG factors evaluated (E, S, G – individually or weighted)
• Data sources, limitations, scientific basis
• Disclosure of Potential Conflicts of Interest

This requirement is particularly relevant for financial market participants (e.g., banks, funds, insurance companies), but will eventually also apply to larger companies that engage in sustainability communication

Important: The regulation also amends Article 13 of the SFDR—anyone who references ESG ratings, for example in presentations, websites, or sales materials, must in the future disclose, in a structured and verifiable manner, the basis on which these ratings are based.

What does this mean for my business?

Even if you don’t issue ESG ratings, many companies use them strategically—whether as a procurement criterion, for external validation, or in sustainability reporting. Examples include:

• EcoVadis as a supplier assessment
• The CDP score in the Climate Report
• B Corp Certification in Employer Branding
• ISS ESG, MSCI, or Morningstar Sustainalytics for investor communications

All of these providers will be subject to regulation in the future—which may affect their methodologies, scoring systems, and comparability. For your company, this could mean changes to scores or methodologies, or new disclosure requirements when using ratings in reporting or marketing.

Conclusion: Re-evaluating ESG ratings as a strategic tool

The new ESG rating regulation is a milestone in the European sustainable finance agenda. It brings greater reliability—but also clear obligations. Companies should actively address this development now.

Here's what you can do:

1. Identify all ESG ratings that you actively use or refer to in communications, procurement, or reporting
2. Ask providers to keep you informed about planned changes—especially regarding methodology, data transparency, and scoring logic
3. Adapt your internal processes, such as disclosure under the SFDR, ESG labels, or sustainability reports
4. Take advantage of the consultation period to provide feedback—for example, through industry associations or directly via the ESMA website
5. Re-evaluate the strategic relevance of each rating: What provides real value? What is merely cosmetic?

Companies that use ESG ratings strategically should position themselves well now—so they aren’t caught off guard by regulatory changes in 2026.