The Financial Conduct Authority will bring ESG ratings providers within its regulatory perimeter as part of a wider effort to strengthen transparency across the sustainable finance market.
Speaking at the Climate Financial Risk Forum Symposium in London on Thursday (23 October), FCA chair Ashley Alder said ESG ratings are increasingly relied upon by investors, but the market remains “fragmented and can lack transparency”.
He confirmed that the regulator will consult on a new framework to ensure ESG ratings are “robust, reliable and aligned with investor needs”.
The move forms part of the FCA’s broader sustainable finance agenda, which includes integrating International Sustainability Standards Board (ISSB) rules into its regime for listed companies and enhancing disclosure requirements under the new Public Offers and Admissions to Trading framework.
Under the upcoming disclosure rule, companies will be able to publish information under a new category of Protected Forward-Looking Statements.
Alder said this will allow firms to outline transition plans and net zero targets with reduced legal liability.
He said climate change is “evidently financially material” and urged the industry to “step up” in positioning the UK as the world’s leading centre for sustainable finance.
Alder added: “We’re committed to clear, proportionate rules, global cooperation and fostering innovation, but we can’t play this game alone.”
