This growing demand is creating a broad landscape of services providers, ratings, datas or methodologies could participates in a way, to a global lack of clarity.

Blurring Extra-Financial Market

According to latest study of the European Fund Asset Management Association (EFAMA), asset managers in Europe manage almost EUR 11 trillion of assets that take some form of ESG considerations into account.

Consequently, EFAMA, the voice of the European investment management industry, recently joined the French and Dutch financial market authoritie’s​ call for a European regulation of ESG data, research and ratings.

European asset managers are observing a double-digit growth in the demand for ESG investments, and clients are increasingly sophisticated in their preferences.

“Asset managers wish to encourage this ESG investment trend by expanding their offering of sustainable products and by providing investors with trustworthy and comparable information – also in response to EU regulation introduced to fight greenwashing and enhance transparency. To fulfil these objectives, investors need solid and reliable data. Given the lack of publicly available information, asset managers are heavily reliant on the information from third-party providers of ESG data, research and ratings, which comes with high costs and many questions.”

Giorgio Botta, EFAMA Regulatory Policy Advisor

AMF study entitled “The provision of extra-financial data: mapping of players, products and services” reports on these developments and draws up a detailed mapping of players in the sector (old or new entrants) and services that they offer.

AMF and EFAMA conclusions are convergent:

Increase and concentration of the players

It is obvious that an increasing concentration in the market for ESG information, partly driven by merger activity have been rising ESG data costs. Some of the most recent acquisitions remains Vigeo- Eiris / Moody’s Corp, Robecosam / S&P Global, Carbon delta / MSCI, or Sustainalytics / Morningstar just to quote a few.

This cost increase of ESG data, according to EFAMA “is particularly detrimental to smaller firms which have less resources and bargaining power, and to end-investors who ultimately foot the bill”.

Lack of transparency

Academic studies agree on the absence of convergence of extra-financial ratings and the need for greater transparency on methods.

“Third-party ESG data and research are often inconsistent, and ratings may vary considerably among providers. This limits the reliability, comparability and usefulness of the information provided and expose investors to the risk of greenwashing”. 


Blurring Extra-Financial Market

Offering more transparency would enable asset managers to ascertain that the information provided can be safely relied on in the context of their investment and product development strategies. This upstream transparency will be essential as well downstream as from March 2021, the Disclosure Regulation will require AIFMs, UCITS management companies, as well as portfolio managers and investment advisers authorized under MiFID, will have to implement policies and disclose certain information about how they integrate sustainability risks in their investment decision‐making, and how these decisions affect sustainability factors.

Despite the UK’s withdrawal from the EU, both the Disclosure Regulation and Taxonomy Regulation have been added to the list of EU legislation which will be “onshored” by the UK. Therefore all European and UK actors, will have to enhance comparability and trust for end-investors, hold market participants accountable and avoid greenwashing. They will be complemented by rules for financial advisers to effectively inquire about retail investors’ sustainability preferences and distribute ESG products

“To improve the quality of research and ratings, and avoid factually incorrect analyses and misleading or incorrect conclusions, EFAMA suggests that third-party providers should step up their dialogue with rated companies. This would help them produce research and ratings that better capture the context in which companies operate”.


​Improve the functioning of the ESG data, research and ratings market are essential for asset managers to better integrate ESG in their investment strategy and disclose to clients.

Article: Joana Foglia – Source: EFAMA / AMF – Blurring Extra-Financial Market