A new European regulatory overhaul of ESG ratings could increase the reporting workload for companies despite efforts to improve transparency in the sector. The EU’s Regulation on the Transparency and Integrity of ESG Rating Activities will require ratings providers to disclose their methodologies and obtain authorization to operate in the EU starting in July 2026. The rules aim to rebuild investor trust in ESG ratings, which are widely used but often criticized for inconsistent methodologies and low reliability.
The changes may also push companies to provide more detailed sustainability disclosures, as ratings agencies rely heavily on corporate reports and submitted data. Greater transparency around rating methodologies and the possibility of separate environmental, social and governance scores could force firms to expand voluntary reporting to maintain strong ratings.
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