British government drafts legislation to allow ESG ratings regulations (2024)
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What’s the story?
The British government is circulating draft legislation that would allow the Financial Conduct Authority (FCA) to issue regulations for ESG rating services. Parliament is expected to introduce a finalized version of the legislation sometime next year.
Why does it matter?
If introduced and enacted, the draft legislation could allow British regulators to create stricter transparency requirements for ESG scores and set standards for easier comparisons between rating systems.
What’s the background?
The UK conducted a consultation (a process for the government to gather public input) last year to assess the need for possible ESG rating regulations. The draft legislation is based on findings from that process and recommendations from the International Organization of Securities Commissions (IOSCO).
Read more:
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Under the proposed legislation, ESG ratings providers would be required to become authorized by the FCA, and meet a series of conditions an assessment of the providers’ supervisory effectiveness, business model, and other requirements. The regulations would apply both to 'ratings produced in the UK and ratings produced overseas which are made available to UK users by way of a business relationship.' The government’s consultation response outlined an anticipated four-year process for the launch of the ESG ratings regulatory regime, with legislation expected to be introduced in early 2025, followed by the development and consultation of policy proposals for the regulation by the FCA, after which affected firms will go through the authorization process, with the regime then going live. The proposal also outlines exclusions from regulatory coverage for some ESG ratings providers, such as credit ratings and investment research providers that are already covered by FCA regulation that provide ESG ratings as part of existing activities, and not as a standalone rating.[1] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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