In December of last year, the UK’s Financial Conduct Authority (FCA) began a consultation on new ESG rating regulations. These regulations would see a variety of requirements imposed on ESG raters in the UK market. These new rules are aimed at promoting transparency and consistency in the ESG ratings industry. The FCA’s Financial Services Consumer Panel submitted its feedback to the consultation on Tuesday, writing in its feedback letter:
“The Panel largely supports the proposals made by the FCA for the regulation of ESG ratings, and we appreciate the significant efforts of the FCA to explain and analyse the impacts of the intervention to stakeholders. We were particularly impressed with the CBA analysis, and the fact that it was supported by pre-analysis research. Although we do have some suggestions for the CBA, we suggest that the FCA consider the approach in this CP as a starting benchmark for future consultations.”
The panel did raise a few concerns. Mainly, it urged the FCA to be attentive to the potential impact on smaller market participants and to make efforts to future-proof the rules. Ratings agencies, on the other hand, have not all received the proposed regulations as generously. Some have bristled at the new requirements, arguing that giving transparency into their methodologies would undermine the industry and reduce competitiveness. For now, the future of the regulations lies with the FCA as they review the findings of the consultation and discuss next steps.
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