The European Commission has contracted SustainAbility (an ERM Group company) and a consortium of sustainable investment specialists to conduct an in-depth study (details here) to:
By doing this, the European Commission has:
We consider ourselves privileged to be part of this process and invite all firms with a current or planned interest in sustainable investment value chain to join our research process.
We approach our research task in a spirit of collaboration and plan to share as much of what we find (subject to commercial confidentiality) with participants in the research. On the pages that follow, we:
If you are the head of ESG / sustainable investment within an asset manager, asset owner or research provider (ESG agencies, sell-side brokers, credit ratings agencies and independent providers) or
… if you are an investor relations officer or CSR manager at a listed company that has dealings with … or expects to have dealings with ESG / sustainable investors in the near future
Also, if you are not a team head or someone with direct responsibility, but know someone in your company who is, please forward this page to them with the words "This study is important. We should contribute..."
The research process, this website and all information and opinions on it have been designed by the research consortium alone. None of the information contained herein is attributed to the European Commission. No inference should be drawn that the European Commission endorses or even agrees with the statements made on this website or the questions asked. This request for proposals contains the full extent of the European Commission's public views on this subject.
In this short opening section, we raise some open contextual questions and help respondents identify the type of questions that we are seeking answers for.
In this first part, the contractor should provide an economic overview of the state of the development of the market for sustainability research and ratings, the number and type of actors, the market trends, the fees structure, the level of competition and identify possible barriers to entry.
The study should also describe whether some national and/or international rules including, but not limited to, legislative or administrative measures could apply to sustainability-related products/services providers.
In addition, it should include an analysis of existing market standards as well as any industry initiatives on self-regulation.
In addition, the contractor should provide a summary of the main constituents of these initiatives and analyse to which extent they are used by the market.
The study should first try to define the main categories of sustainability-related products and services providers using a transparent categorisation method. Each category should present common characteristics and trends. The categorisation method should also take into account whether or not those providers already perform their activities under a specific EU status (such as MIFID investment firm or benchmark administrator).
The study should also examine different aspects related to the governance and organisational arrangements of the providers. The assessment should include at least:
The study will identify main categories of sustainability-related products and services, using a transparent categorisation method. Each category should present common characteristics and trends.
For the purposes of the classification, the contractor should assess:
Furthermore, the contractor should assess whether there are differences in the methodologies deployed depending on the size of the company (e.g. SMEs vs. large companies). The contractor should also identify overall geographical, sector or size (e.g. towards bigger companies) bias in the coverage of products and services offered.
For carrying out Task 1, the contractor should contact and exchange practical experiences with sustainability experts, including:
The development of the classification system and definition of terms should be done following interaction and conversation with the industry and having regard to the acceptance and existing use of the notions. The study will also establish trends in the developments.
The study will help understand which are the data sources used by sustainability-related products and services providers such as
The study will also identify the percentage of estimates submitted by third party sources other than the reporting companies and assess how this impacts transparency of input data. To fulfil this task, the contractor should liaise with sustainability products/services providers as well as directly with companies.
The contractor should distinguish which kind of data comes from which source and should give a proportion of how much of the data collected by sustainability-related products and services providers comes from which source. To increase readability, it is recommended to use charts and graphs including percentages.
The study should analyse the process providers go through to ensure the accuracy of the data they collect and/or estimate, and the procedures for dealing with any data inconsistency (like in-house estimation models, when reported data is not available).
The study should also analyse the process providers use to ensure the quality of the assessment (like use of certification, audit or reviews by third parties).
The study will also analyse pros and cons of enhancing the quality assurance, as well as whether enhancing data quality would be required to enable informed investor decisions.
This task will focus on products assessing companies’ sustainability, either on the aggregated (ESG) or individual factors level (like E, S, or G) in the form of a rating, score or ranking.
This task will not apply to categories of products which do not entail the attribution of a rate, score or ranking number. The choice of products will be carried out in co-operation with the contracting authority.
The study will analyse main methods of measuring sustainability and the transparency of this process as well as of methodologies. The study will also analyse whether methodologies can be biased, and what are the consequences of the bias. It will help to understand reasons for a low correlation between results of assessments of the same company done by different providers.
The study should analyse how providers carry out their assessments, in particular:
The study should analyse the use of sustainability-related products/services by investors and asset managers, per categories of providers and products, and in particular:
To that effect, the contractor should propose a methodology that will ensure the involvement of a representative number of:
The contractor should also take into account the differences between asset managers pursuing passive investment strategies and asset managers pursuing active investment strategies to answer the above- mentioned questions.
The contractor should also interview relevant NGOs on the perceived quality of sustainability-related products and services, and the bias/problems that they identified.
The study will explore the relationship between assessed companies and the providers of sustainability-related products and services.
The contractor is expected to explore views of companies on:
The study will also analyse the costs for companies, and costs relative to their size, of replying to multiple individual requests for information (i.e. questionnaires, surveys), and costs for rated companies of getting feedback from sustainability-related products / services providers.