The UK Treasury is set to outline the regulatory regime for ESG ratings providers at the start of next year, according to reports this morning.
Whitehall sources reportedly told the Financial Times that Ministers were planning to unveil formal proposals as early as January next year, following the three-month consultation on the matter that closed in June.
The consultation, which was launched by the Treasury back in March, sought views on whether regulation for providers of ESG ratings should be introduced, and on the potential scope of a regulatory regime. Minister are still formally analysing the consultation responses, however.
The review followed Chancellor Jeremy Hunt’s rollout of the Edinburgh reforms in December 2022, when he said the government wanted “improved transparency and good conduct in the ESG ratings market”, and that the Treasury aimed to consult on a potential regulatory regime for ESG ratings providers.
ESG ratings within both the UK and global markets have been widely criticised for the lack of comparability between different providers and the outcomes reached.
The UK Treasury has been contacted for comment.
A Financial Conduct Authority spokesperson declined to comment directly on a potential timetable for unveiling any ESG ratings regulations.
The FCA spokesperson told Investment Week: “We continue to work with government on their consultation for a regulatory regime for ESG ratings providers.”
Commenting on the reports, Allister Furey, CEO at carbon intelligence platform Sylvera, said any moves to standardise ESG metrics and provide more uniform definitions of what best practice looks like in the sector could help to “enable greater transparency and, in turn, drive net zero progress in the long-term.”
“Ultimately, we need to shift net zero from a burden to a benefit and unlock a desperately needed wave of action, real progress against net zero targets, and a world that can avoid climate disaster,” he said.
“With more reliable data about the actions companies are taking on their net zero journeys, investors can then have the confidence to back firms who are taking their role in mitigating climate change seriously. In time, with standardised and independent data, companies will see financial incentives emerge, such as higher share prices and cheaper borrowing.”
A version of this story originally appeared at Investment Week.
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