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We delve into the EU's regulatory changes aimed at boosting transparency in sustainable investments. By examining disparities among ESG rating agencies, we assess how these differences challenge standardization and consensus. Our analysis underscores the critical need for clearer ESG assessments to guide the sustainable investment landscape.
Wir untersuchen die regulatorischen Änderungen in der EU, die die Transparenz bei nachhaltigen Investitionen erhöhen sollen. Durch eine Untersuchung der Unterschiede zwischen ESG-Ratingagenturen bewerten wir Herausforderungen für Standardisierung und Konsens von Ratings. Unsere Analyse unterstreicht die Dringlichkeit klarerer ESG-Ratings für eine nachhaltige Invesitionslandschaft.
This paper addresses the need for transparent sustainability disclosure in the European Auto Asset-Backed Securities (ABS) market, a crucial element in achieving the EU's climate goals. It proposes the use of existing vehicle identifiers, the Type Approval Number (TAN) and the Type-Variant-Version Code (TVV), to integrate loan-level data with sustainability-related vehicle information from ancillary sources. While acknowledging certain challenges, the combined use of TAN and TVV is the optimal solution to allow all stakeholders to comprehensively assess the environmental characteristics of securitised exposure pools in terms of data protection, matching accuracy, and cost-effectiveness.
In this study, we unpack the ESG ratings of four prominent agencies in Europe and find that (i) each single E, S, G pillar explains the overall ESG score differently,(ii) there is a low co-movement between the three E, S, G pillars and (iii) there are specific ESG Key Performance Indicators (KPIs) that are driving these ratings more than others. We argue that such discrepancies might mislead firms about their actual ESG status, potentially leading to cherry-picking areas for improvement, thus raising questions about the accuracy and effectiveness of ESG evaluations in both explaining sustainability and driving capital toward sustainable companies.