【欧州】【Common】
Common - Current situation of trends of the European investors
for ESG (Environment, Social, Governance) companies: Improving
the reliability and transparency of ESG ratings activities
towards decarbonisation

Andrea Antolini

Former Researcher JTTRI【概要：Summary】

Therefore, the European Commission presented a

ESG (Environment, Social, Governance) is an

proposalimportantconcept

reliability and transparency of ESG ratings

issues,socialtoassesssustainability

responsibility,

and

good

on

a

Regulation

toimprovetheactivities (COM (2023) 314 final). Furthermore,governance of companies. Also in the EU, ESG isnewbecoming an important concept as ESG ratings

Disclosure

play an increasingly important role to assess

Sustainability

companies’(CSRD), Corporate Sustainability Due Diligencesustainability

in

the

financial

regulations

like

Sustainable

Finance(SFDR),

Corporate

Regulation

ReportingDirective

market, as a part of the investors’ sustainable

Directive(CSDDD),

CarbonBorderinvestment

and

the

strategies.

ESG

ratings

andMechanism(CBAM),

actorsenabletheregulationsareinvestors to direct investments into companies

standards

for

that

the

accountability, and environmental performance

decarbonisation of their products and servicesof companies. The new rules are expected to makeand that are directing their efforts towards the

ESG ratings and their underlying methodologies

achievement of the European Green Deal’s net-

more

zero GHG emissions target. Thereby, ESG ranking

sustainability and decarbonization of companies.

classification

are

of

putting

The

Adjustment

markettheirpriorities

intransparent

introducedtoevaluating

towards

EU

Taxonomy

setting

newtransparency,

achievinghigheris a tool that can be used to effectively
facilitate the transition towards decarbonizing【記事：Article】

the EU’s economy. However, there are challenges

1. The concept of ESG and the EU’s ESG

within the ESG rating, regarding data quality,

reporting standards and legislationand there are concerns regarding a lack ofTheconcepttransparency and regulation, which can lead togovernance (ESG) is a set of standards assessing“greenwashing” of companies, since also major

a company's performance regarding environmental

polluting companies are getting high ESG scores

criteria (E), social criteria (S) and governancedespite their poor environmental record.

criteria(G)ofEnvironmental,(Bernoville2024).

social

The

and

ESG’s

environmental criteria (E) examine how a company
海外の最新事情・トピック

2024 年6 月号｜JTTRI｜p. 1

performs regarding its environmental impacts.

Parliament

The social criteria (S) examine how a company

Financial Reporting Advisory Group (EFRAG) andmanages relationships with employees, suppliers,

the International Sustainability Standards Board

customers, among others, while governance (G)(ISSB)

defines a set of rules, best practices, andinteroperability for climate reporting to giveprocesses that determine how an organisation iscompanies the opportunity to comply with bothmanagedstandards regarding climate reporting (DG forandcontrolled(Conmyn.d.,Robeco2024).

have

Meanwhile,

publishedguidance

n.d.a). Since decarbonization has become an

Financial

important

European Commission 2023c).

topic

in

the

ESG

concept,many

Stability

the

2024,

European

on

their

ESRS/ISSBn.d.,organizations and companies try to define net-

The new EU Taxonomy regulation (Regulation (EU)zero2020/852)

strategies,

criteria

and

which

then

are

measureanalysed

by

in

ESG

aims

to

guide

investment

towardconscious

sustainable projects aligned with a net-zero

investors to deciding on potential investments

trajectory towards 2050 (Bernoville 2024, Robecoin those companies (Bernoville 2024, UNDP 2023).

n.d.b).

In the EU, several ESG reporting regulations andobjectives

frameworks

inenvironmentalforactivities (European Commission n.d.b, n.d.c).

transparency, accountability, and environmental

The EU Taxonomy is expected to help companies toperformance (Bernoville 2024, Robeco n.d.b).

redirect their investment into low or zero CO2

The EU’s ESG related legislation includes, mostemission solutions, while protecting private

importantly, the Sustainable Finance Disclosure

investors

Regulation (SFDR) (Regulation (EU) 2019/2088),(European Commission 2023b). Early reporting

the Corporate Sustainability Reporting Directive

trends show that companies are increasingly(CSRD), theusing the EU Taxonomy as part of their transition

have

preparation,

been

introduced

setting

new

Corporateorarestandards

Sustainability

Due

Diligence Directive (CSDDD), and the EU Taxonomy

Six

key
are

climateandenvironmental

definedtoassessessustainability

fromcompanies’

of

the

economic

greenwashingefforts (European Commission 2023a).

(Bernoville 2024).
The

CSRD

(Directive(EU)2022/2464)

covers

2. TheEU’s

ESG

ratingproviders–larger EU and non-EU companies that must produce

activities, shortcomings and necessary

a sustainability report covering a range of ESG

improvements

topics including climate change (Bell et.al.

ESG ratings play an increasingly important role

2023,

CSRD

in the EU sustainable finance market and provide

Directive helps investors and other stakeholders

information about the sustainability performanceto evaluate the sustainability performance ofof a company or a financial instrument, regarding

companies

2022/2464).

the exposure to sustainability risks and/or its

Furthermore, the Corporate Sustainability Due

impact on people and the environment (European

Diligence

Directive(CSDDD)will

Commission

introduced,

obliging

companies

toEuropeanprevent,

Commission(Directive

mitigate,

andn.d.a).

(EU)

account

The

soon

be

identify,

foradversen.d.d).

Investors

andbenchmarkadministrators use ESG ratings as part of theirsustainable

investment

strategies(Europeansustainability impacts in their operations andCommission 2023a, DG for Financial Stability

value

model

2023). ESG ratings can attract investment forcompatible with the global warming limit ofdecarbonization, as ESG rankings can improve the

1.5°C under the Paris Agreement (Bernovillecompanies'

2024,

company’s improvement in its ESG ranking could

chainsCouncil

to

of

make

the

海外の最新事情・トピック

their

EU

business2024a,

Europeanenvironmental

2024 年

reputation,

and6 月号｜JTTRI｜p. 2

a

of

ESG

ratings

towards

environmental reputation is improving (European

decarbonisation:

The

exampleofCommission 2023a). At the same time, ESG ratings

makers’ scope 3 emissions

attractcannewinvestment

as

the

also

promotetransparency

company’s

efforts

towards

corporate

regardingincreasing

3. Theproblemcara

ESG ratings, when functioning, can play a major

itsrole for the investor’s decision in favour ofsustainability by fostering more sustainable

investments

incompanies

investments and consequently, they can reduce

production

andtowards

greenwashing.

industries (Cuatrecasas 2024, Ranzato 2023).

However,theESG

ratings

marketcurrently

However,thecurrent

withsustainabledecarbonisation

ESG

ratings

lack

of

of

suffers from a lack of transparency. It is widelytransparency in the applied methodologies andunregulated, and here the greenwashing can start

they are lacking clarity on what the rating

as a major problem as polluters are getting highintends to represent. Assessments often occur

ESG scores despite their poor environmental

through a peer-to-peer comparison, disregarding

record. One example is the case of automobile

the companies’ absolute performance regarding

manufacturing companies, which are major CO2

CO2 emission reduction, making companies scoring

emitters mainly due to their scope 3 emissions.

high if their environmental results are slightly

Nevertheless, they score high on environmental

better than those of their competitors (Ranzato

criteria,2023). A study conducted by the environmental

assessments

based

on

major

ESG

raters’(Ranzato2023).

Therefore,to

NGO Transport & Environment (T&E) (T&E 2022a,

generally improve transparency of ESG ratings

2022b) assessed the automobile manufacturers’

and the integrity of operations of ESG rating

ESG rating regarding their scope 3 emissions,providers, the European Commission is proposing

based on S&P 2020 figures (T&E 2022b).

a Regulation on the transparency and integrityof ESG rating activities (COM (2023) 314 final).

Fig 1: Share of GHG emissions by scope, in %The objectives are to enhancing the quality of
ESG ratings by (i) improving transparency of ESG
ratings characteristics and methodologies, by(ii) ensuring increased integrity of operationsof ESG rating providers and preventing the risksof conflict of interest at ESG rating providers'level, while still allowing the ESG rating
providers to maintain full control over their
methodologies (COM (2023) 314 final, DG for(Source: S&P FY 2020, cited by T&E 2022b)

Financial Stability 2023, European Commission
2023a). To ensure the quality and reliability ofWhile the average scope 3 emissions accounts for

ESG

and

98% of a carmakers life cycle emissions, for

ratingAlphabet (Google) they are 58%, 85% for Exxon

providers will be authorized and supervised by

Mobil and 20% for Heidelberg Cement (T&E 2022b).

the European Securities and Markets Authority

Regarding the carmakers GHG emissions, the vast

(ESMA) (Council of the EU 2024b).

majority (98%) are scope 3 emissions, primarily

ratings,

maintaining

protecting

marketinvestors

integrity,

ESG

emitted due to the use of cars, including thetotal distance travelled and fuel consumption ofcars (T&E 2022a). This means that in case of
海外の最新事情・トピック

2024 年6 月号｜JTTRI｜p. 3

automobile manufacturers, about 98% of the total

to address environmental and governance issues

emissions3and the legislation could help investors makeemissions are included (T&E 2022b). However,

better informed decisions towards creating acarmakers use selective data for their scope 3

sustainable financial system that supports theemission

calculations,

their

EU's goal of becoming climate-neutral by 2050

vehicles’lifetimeona(Key ESG 2024, DG for Financial Stability 2023,

rather low 100,000 kilometres total distance andEuropean Commission n.d.d). The new Regulation

thereby they lower their total scope 3 emissions

on the transparency and integrity of ESG rating(T&E 2022a). Due to this approach of selected

activities (COM (2023) 314 final) is expected toscope 3 emissions and their very limited weightstrengthen the reliability and comparability ofin ESG calculations, with scope 3 emissions only

ESG ratings and to improve the integrity of theaccounting for 0.6% of the total ESG-Score, caroperations of ESG ratings providers (Council ofmanufacturers receive a higher ESG rating thanthe EU 2024b). Finally, decarbonization andtheir high scope 3 emissions would suggest (T&E

sustainability

2022b). Consequently, the car industry’s ESG

supported by separating the ratings of E, S andratings fail to capture the companies’ true

G factors to emphasise the environment related

climate impact and lack of decarbonisation (T&E

activities of companies (Cuatrecasas 2024).

are

only

captured

when

like

averagescopebasingemissions

measurescould

furtherbe

2022a, 2022b). As ESG ratings influence and drive
private investments, these flaws in the ESG

4. Conclusion and considerations

rating, caused by significantly underreporting

ESG ratings play an important and enabling roleof scope 3 emissions, mislead investors who thenfor

put their capital into the wrong companies thatsustainable finance market, as they provide

in absolute might not take enough efforts toimportant information on how a company performs

decarbonise(Ranzatotoregardingaccelerate

the

and

decarbonisation targets. Since decarbonisation

decarbonization, ESG indexes would need to put

plays an important role to achieve the 2050 net

more weight on the car companies’ life-cycle

zero emission target, companies that effectively

emissions and address the substantial under-

reduce their carbon footprint should better

representation of scope 3 emissions. In thisbenefit from high ESG ratings.

context,

theTherefore, as the example of the carmakers andratingtheir underreporting of scope 3 emissions for a

activities (COM (2023) 314 final) could improve

car’s lifetime shows, the ESG ratings’ flaws

the reliability of ESG ratings activities.

need to be tackled to end the misleading highMeanwhile, since the EU Taxonomy is incorporated

ESG ratings for companies that in absolute might

into the SFDR's disclosure requirements fornot take enough efforts to decarbonise, andfinancial market participants and included inthereby mislead investors to put their capital

the CSRD legislation to guide companies in

into the wrong direction and companies.

reporting on their sustainability performance,

It needs to be constantly ensured that ESG

investors should use the EU taxonomy as an E

ratings of companies will not become a tool forscore, as it better represents the environmental

greenwashing.

performance of companies (T&E 2022b). Together,ranking providers need to ensure the high quality

the CSRD, the SFDR and the EU Taxonomy are

and reliability of ESG ratings and services in

expected to help financial market participants

the EU and at global level.

thetransparency

green

EU’s
and

2023).

newtransition

Regulation

integrity

海外の最新事情・トピック

Therefore,

of

ESG

on

the

properthefunctioning

EU’s

the

EU’s

sustainability

Therefore,

2024 年

of

new

rules

on

and

ESG

6 月号｜JTTRI｜p. 4

L_2021442EN.01000101-E0013, 9.12.2021, accessed
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