Sven Giegold
Member of the European Parliament – Greens/EFA Group

Speaker of the German Green Delegation

New ESMA chair: Verena Ross wants to make credit ratings climate-proof

Today, on 30 September 2021, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) confirmed Verena Ross as chairwoman of the European Securities and Markets Authority (ESMA) by a large majority in a vote by secret ballot. Only a week ago, the Council of Ministers had voted in favour of the candidate. This was preceded by months of wrangling over the post in the Council. Since the Italian government in particular pushed for the nomination of the Italian Carmine di Noia, the negotiations were blocked. Verena Ross, who was Executive Director of the authority until June, was stalled for months. Due to the ongoing deadlock, the ESMA chairmanship has remained vacant since April. Verena Ross now has to be confirmed by the plenary of the European Parliament, but this is considered certain.

At my request, Verena Ross committed to getting serious about climate risks vis-à-vis credit rating agencies. ESMA is the direct supervisor over European rating agencies and monitors, among other things, the quality of rating methodologies used. The fact that even the largest CO2 emitters on the planet with fundamentally unsustainable business models often continue to receive ratings in the upper investment grade points to gross methodological weaknesses. Since the ratings of the major agencies differ little in this respect, there is truly an oligopoly failure here. In the past, ESMA had mainly focused on the disclosure of methodologies with regard to ESG risks. Verena Ross announced that in the future the authority would also scrutinise more closely whether all relevant factors, especially climate and environmental risks, are actually taken into account appropriately.

MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:

“With Verena Ross, ESMA gets a strong and competent leadership. Alongside Christine Lagarde and Petra Hielkema, she will be the third top woman in the EU financial institutions. The shameful wrangling over her nomination in the Council of Ministers has thus finally come to an end. Due to national sensitivities, the important EU authority, which I had the privilege to help launch 10 years ago as founding rapporteur, remained without leadership for months. ESMA plays a key role in the urgently needed deepening of the European Capital Markets Union. Verena Ross must use her excellent knowledge of the Authority to quickly restore ESMA’s full strength. I congratulate Verena Ross on her confirmation today and look forward to working with her in the future.

I expect Verena Ross to give the issue of sustainability risks a prominent role at ESMA. So far, ESMA has not achieved enough in the supervision of credit rating agencies. It is a good first step that Verena Ross wants to increase the pressure on credit rating agencies that do not adequately consider sustainability risks. Many of the planet’s biggest CO2 emitters still get top ratings from all the major rating agencies, even though their business models are clearly doomed in the face of the Paris agreement. It is up to ESMA to make the models of rating agencies climate-proof and end this oligopoly failure in the ratings market.”

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Video of the hearing of Verena Ross before the ECON Committee on 30 September 2021:
https://multimedia.europarl.europa.eu/de/committee-on-economic-and-monetary-affairs_20210930-0900-COMMITTEE-ECON_vd 

My question to Verena Ross regarding the consideration of climate-related risks by credit rating agencies:
https://multimedia.europarl.europa.eu/en/committee-on-economic-and-monetary-affairs_20210930-0900-COMMITTEE-ECON_vd?start=20210930073850&end=20210930074322 

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