Draft Financial Services and Markets Act 2023 (Prudential Regulation of Credit Institutions) (Consequential Amendments) Regulations 2025 Draft Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025

Debate between Lucy Rigby and Gareth Davies

Tuesday 2nd December 2025 General Committees

[Lucy Rigby]

I welcome the consensus on the draft regulations. Four principal points were raised in relation to the draft order. The first was on the international position, and the recommendations we are putting in place in this draft order are in line with the IOSCO and OECD recommendations. The EU framework has been legislated for, but it will not come into force until 2026. In many areas of financial services, we have the ability to put in place an overseas recognition regime—an ORR. We do not yet have the ability to do that in relation to this, but we hope to take the power in the next financial services Bill to enable us to bring forward exactly this kind of measure where we wish to do so. The shadow Minister might be aware that Hong Kong, Singapore and Japan have codes of conduct of this nature.

In relation to charities—this is a good point and was considered—the scope of the regulated activity set out in the draft order is designed to be proportionate to the risk of harm. As such, charities will be excluded from regulation where a rating is provided on an occasional or one-off basis, or where there is no remuneration or other financial benefit provided to the charity. As I said, this approach, informed by consultation, ensures that the regulation is risk-based and proportionate while avoiding loopholes.

The shadow Minister also mentioned defence. The Chancellor has stated very clearly her view that supporting the defence industry, and indeed Ukraine, is consistent with ethical investing. The regulation will allow investors to more fairly evaluate ESG risks and opportunities related to defence companies. I should make it clear that we have engaged extensively with the defence sector, and we think there is quite limited evidence that defence firms have struggled to access finance on ESG grounds.

Briefly, the fiduciary duty is important and, as the shadow Minister knows, it has been much discussed. The Pensions Minister will address it further in subsequent stages of the Pension Schemes Bill.

[Gareth Davies]

I am very grateful to the Minister for outlining the Government’s position on defence stocks. I wonder whether she could do the same for oil and gas.

[Lucy Rigby]

The point in relation to oil and gas is exactly the same as that for defence. There is no conflict between what we are doing here and investment in those areas. If anything, it will be helpful across the board. Fiduciary duty was the final point raised, so I will leave it there.

Question put and agreed to.

DRAFT FINANCIAL SERVICES AND MARKETS ACT 2000 (REGULATED ACTIVITIES) (ESG RATINGS) ORDER 2025

Resolved,

That the Committee has considered the draft Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025.—(Lucy Rigby.)