HM Treasury has published the outcome of its consultation on the new regulatory regime for ESG ratings providers and the draft legislation that will create it. The regime will be created through the RAO, and the government intends to finalise the legislation in 2025 after which the FCA will consult on the specific requirements. There will be a new regulated activities of providing an ESG rating – whether solicited or unsolicited – where the rating is:
- produced using an established methodology and a defined ranking system of ranking categories;
- made available by an ESG rating provider either where the provider is in the UK but or where ratings by overseas providers are made available to UK users by way of a business relationship (such as a subscription); and
- likely to influence a decision to make a specified investment (for RAO purposes) unless the provider could not reasonably have expected that it would do so.
There will be exclusions, such as for intra-group ratings, for private use by the person the rating relates to or where the rating is provided as an integral part of activities as a journalist, academic or charity, or where the rating is provided in the course of other regulated activities.
The draft legislation is open for technical comment until 14 January 2025.