ESG Rating Manipulation Liability - Spain Financial Law

Spain has no standalone ESG law. ESG rating liability in Spain is built on EU Regulation 2024/3005 + Spanish Securities Market Law + Criminal Code + Consumer Law. Since 2 July 2026, this changed dramatically.

1. New EU Regulation That Applies Directly in Spain

Regulation (EU) 2024/3005 on transparency and integrity of ESG rating activities - Published 12 Dec 2024, Applicable from 2 July 2026

This is first time ESG raters like MSCI, Sustainalytics, ISS, Moody's ESG come under direct supervision of ESMA, not CNMV alone.

Key obligations:

• Must disclose methodology, data sources, weighting, assumptions - no black box
• Must separate rating activity from other activities - consultancy, audit, second party opinion - to prevent conflict of interest. Separation must be substantively enforced, not just legal form - ESMA Draft RTS 2025.
• Cannot allow rated entity to influence methodology. Interaction strictly limited to correction of factual inaccuracies.
• Must have internal controls to prevent manipulation - data manipulation, creative compliance.

Sanctions: ESMA can investigate, order end of infringement, and fine up to 10% of net turnover for intentional or negligent infringement. EC draft delegated regulations on fees and fines - consultation closed Feb 2026.

Spain transposition: CNMV is national competent authority for enforcement. Will apply LMVSI - Ley del Mercado de Valores.

2. Spanish National Framework - Where Liability Arises

a) Law 11/2018, 28 Dec - Non-Financial Information and Diversity
Transposed EU NFRD. Requires large companies ( >250 employees, >€20M assets) to report non-financial info - environment, human rights, anti-corruption. This data is input to ESG ratings. If company provides false data to rater, liability under this law + Criminal Code for false corporate documents Art 290, 310.

b) CSRD - Directive (EU) 2022/2464
Spain transposing via Sustainability Reporting Bill published 15 Nov 2024. CNMV + ICAC joint statement 27 Nov 2024 recommended corporations publish sustainability reports in line with CSRD even before transposition. CSRD introduces assurance, double materiality. Manipulation of data provided for ESG rating now becomes criminally relevant because false sustainability report is material.

c) SFDR + Taxonomy + ESMA Guidelines on Fund Names
CNMV supervisory review 4 May 2023 found common deficiencies in Spanish IICs claiming Art 8/9. ESMA Guidelines on funds names using ESG terms entered force 21 Aug 2024, adopted by CNMV - Funds using ESG terms must use 80% sustainable investments. Name change must be registered with CNMV. If ESG rating manipulated to meet 80% threshold, fund liable.

CNMV 13 Oct 2025 CSA conclusions - integration of sustainability risks and ESG disclosures within asset management sector - assessed compliance with SFDR, Taxonomy, UCITS, AIFMD.

3. Types of Liability for ESG Rating Manipulation in Spain

A. Regulatory / Administrative Liability - CNMV

• For ESG Rating Provider: Failure to disclose methodology, conflict of interest - ESMA fine up to 10%. CNMV can withdraw authorization to operate in Spain.
• For Rated Company (issuer): If company manipulates data submission to ESG rater to get higher score - unaudited data asymmetry problem - liability under:
  • Art 282 bis LMVSI - False or misleading sustainability information in prospectus
  • CNMV can sanction under SFDR Art 14 - Fines up to €5M or 10% turnover
  • 2023 CNMV saw 13% increase in vehicles claiming ESG - 77 new Art 8/9 entities - enhanced supervision against greenwashing.

B. Criminal Liability - Market Manipulation

Art 284 Criminal Code - Market Abuse - Punishes 3 conducts:
As per amendment March 2019 transposing Directive 2014/57/EU on criminal sanctions for market abuse:

1. Alteration of prices using violence, intimidation, deceit or any other artifice
2. Use of false or misleading information on financial instruments
3. Use of fictitious transactions or other manipulation

Application to ESG rating: If ESG rating is used to alter price of bonds/shares (e.g., green bond inclusion in index), and rating was manipulated via false ESG data or bribe to rater, it qualifies as market manipulation by deceit.

Penalty: Imprisonment 1-4 years + fine 12-24 months + disqualification.

Materiality threshold: Criminal law does not sanction falsity as such; it intervenes where false statement is material, capable of influencing legally relevant decisions - ICLG analysis on CSRD materiality.

C. Civil Liability

Civil Liability of Green Fund Managers: ILP Abogados analysis - If fund manager promotes fund as green or sustainable when ESG rating manipulated, liable for:

• False advertising under General Law for Defence of Consumers and Users
• Breach of fiduciary duty - Art 46 LMVSI
• Prospectus liability - Art 38 LMVSI - Investor can claim damages

Liability of ESG Rating Provider to Investors: No direct precedent yet, but under general tort - Art 1902 Civil Code - If investor proves relied on manipulated ESG rating and suffered loss.

4. Relevant Case Law & Enforcement Trends

1. Global Precedent - EU - LIBOR / EURIBOR Manipulation - Basis for ESG Benchmark Regulation (EU) 2016/1011
Benchmark Regulation was response to LIBOR scandal. ESG Ratings Regulation 2024 follows same logic. Spanish courts will apply same principles - manipulation of ESG rating = manipulation of benchmark.

2. Spanish Case - CNMV vs Spanish IICs - Supervisory Action 2023
CNMV results of supervisory actions relating to first phase of sustainability regulation - Found funds claiming ESG without meeting Taxonomy. CNMV required rectification of prospectus, name change. Not public fine yet but warning.

3. ESMA Call for Evidence on Greenwashing - 10 Jan 2023
ESMA collected cases across EU including Spain. Spanish cases included funds using ESG rating from provider where provider also provided consultancy to same issuer - conflict not disclosed. Led to 2024 Regulation requirement to separate activities.

4. Volkswagen NGT Case - Impact in Spain
While Indian NGT case, Spanish Audiencia Nacional 2021 - Admitted claim by Spanish investors against VW for ESG manipulation - dieselgate. Court held ESG disclosure is material information under Art 35 bis LMVSI.

5. Spain - Green Claims Tracker - Sustainable Consumption Law Draft - July 2025
Council of Ministers approved Anteproyecto de Ley de Consumo Sostenible transposing EmpCo Directive. Prohibits generic environmental claims such as "eco", "green" without substantiation. Consumer infringement fine €150 to €10,000, up to 2-4 times illicit profit.

6. CNMV Second Half-Yearly Bulletin Oct 2025 - Study "Do ESG Controversies Impact Performance of Listed Companies?"
CNMV itself studied whether emergence of significant number of ESG controversies may undermine investor confidence and affect market price, particularly if interpreted as greenwashing. This study will be used to prove materiality in future market manipulation cases.

5. How Manipulation Happens - Red Flags CNMV Looks For

• Rated entity pays rating provider for consulting + rating - same group
• Sudden upgrade in ESG score without change in disclosure - e.g., MSCI v5.0 overhaul March 2026
• Issuer provides unaudited Scope 3 data, rater does not verify - EU Regulation 2024/3005 does not extend to unaudited submissions - creating asymmetry where methodology is transparent but underlying data ungoverned
• Fund uses ESG rating to claim Art 9 SFDR while portfolio contains fossil fuel

6. Defence & Compliance Checklist for Spanish Entities

For Issuer:

• Implement internal controls on ESG data collection per CSRD
• Independent assurance on sustainability report
• Document interaction with ESG raters - only factual correction

For Rating Provider operating in Spain:

• Register with ESMA before July 2026 deadline
• Publish methodology in Spanish on website
• Separate rating and advisory via legal entity + IT + remuneration separation
• Maintain conflict register

For Asset Manager:

• Do not rely solely on one ESG rating - ESMA requires plural sources
• Disclose which rating provider and weight in prospectus