Britain Takes First Step To Regulate Company ESG Raters
- Providers of environment, social and governance (ESG) ratings on companies will be asked to apply a voluntary best practice code as a first step to regulating the sector, Britain's Financial Conduct Authority (FCA) said on Tuesday.
- Trillions of dollars have flowed into sustainable investments globally using unregulated ESG ratings on companies as a guide for their 'green' credentials, leaving regulators worried about greenwashing or over inflated ESG claims.
- Britain's government is considering giving the FCA powers to directly regulate ESG ratings providers.
- In the meantime, the FCA said it wants the sector to develop and follow a voluntary code of conduct to increase transparency, ensure good governance and that conflicts of interest are properly managed with sufficiently robust systems and controls.
- The code will reflect recommendations from the global securities regulatory body IOSCO, and developments in Japan and the European Union, the FCA said.