FCA pleased to move forward on ESG rating provider regulation

Following the Chancellor’s confirmation that the Government has finalised the legislation to bring ESG ratings providers within FSMA scope, the FCA says it can now consult on its proposed rules for relevant firms, and will do this before the end of the year. The rules will focus on:

• transparency
• governance
• systems and controls
• conflicts of interest.

The draft legislation will create a new regulated activity of “providing ESG ratings”, so that any person providing them will need FCA authorisation in order to do so, unless they fall within an exclusion. Exclusions will cover circumstances such as ratings for intra-group or private purposes and ratings incorporated in unregulated credit ratings.