Government to introduce regulatory regime for ESG ratings industry

Whitehall insiders told the Financial Times that ministers intend to unveil the formal proposals as early as January following a three-month consultation that closed in June. It comes after concerns in the UK and elsewhere about the largely unregulated sector – with there being little oversight regarding how organisations create ESG criteria and rate companies against them.  

As part of this, the Treasury is examining whether regulating ESG agencies will require fresh legislation or could be achieved through measures implemented under existing laws, however people close to the matter told the Financial Times ministers were still formally analysing the consultation responses. 

Additionally, they said a proposal to create a new watchdog has not been ruled out – although expanding the remit of the Financial Conduct Authority (FCA) is considered the likelier option.

Speaking to the Financial Times, the Treasury said it would publish a government to its consultation on a potential regulatory regime for ESG ratings providers “in due course”, while the FCA said: “We continue to work with government on their consultation for a regulatory regime for ESG ratings providers.”