(c) the ESG rating provider retains the necessary expertise to supervise the outsourced functions effectively and to manage the risks associated with the outsourcing;

(d) the service provider discloses to the ESG rating provider any development that might have a material impact on its ability to carry out the outsourced functions effectively and in compliance with applicable law and regulatory requirements;

(e) the ESG rating provider is able to terminate the outsourcing arrangements where necessary;

(f) the ESG rating provider takes reasonable steps, including contingency plans, to avoid undue operational risk related to the participation of the service provider in the ESG rating determination process.

ANNEX III

DISCLOSURE REQUIREMENTS

1. Minimum disclosures to the public

In accordance with Article 23 of this Regulation, ESG rating providers shall, at a minimum, disclose to the public on their website and through the European single access point (ESAP) the following:

(a) an overview of the rating methodologies used and changes thereto, including whether analysis is backward-looking or forward-looking and the time horizon covered;

(b) the industry classification used;

(c) an overview of data sources, including whether data is sourced from sustainability statements required under Directive 2013/34/EU or from information disclosed under Regulation (EU) 2019/2088 and whether sources are public or non-public, and an overview of data processes, estimation of input data in case of unavailability and frequency of data updates;

(d) the ownership structure of the ESG rating provider;

(e) information on whether and how the rating methodologies are based on scientific evidence;

(f) information on the ESG rating’s clearly defined objective and marking whether the rating is assessing risks, impacts, or both, according to the double materiality principle, or any other dimensions, and in the case of double materiality the proportion of the risk and impact materiality;

(g) the ESG rating’s scope, namely, whether it covers an individual E, S, or G factor or whether it is an aggregated rating aggregating E, S and G factors, or whether it covers specific issues such as transition risks;

(h) in the case of an aggregated ESG rating, the weighting of the three overarching E, S and G categories of factors (for example 33 % for the E factor, 33 % for the S factor, 33 % for the G factor), and the explanation of the weighting method, including weight per individual E, S and G category;

(i) within the E, S or G factors, specification of the topics covered by the ESG rating, and whether they correspond to the topics from the sustainability reporting standards developed pursuant to Article 29b of Directive 2013/34/EU;

(j) information on whether the rating is expressed in absolute or relative value;

(k) where applicable, reference to the use of artificial intelligence in the data collection or rating process including information about current limitations and risks of using artificial intelligence;

(l) general information on criteria used for establishing fees charged to clients, specifying the various elements taken into consideration, and general information on the business/payment model;

(m) any limitation in data sources and methodologies used for the construction of ESG ratings;

(n) the main risks of conflicts of interest and the steps taken to mitigate them;

(o) if an ESG rating of a rated item covers the E factor, information on whether that rating takes into account the targets and objectives of the Paris Agreement or any other relevant international agreements;