Question to the HM Treasury:

To ask His Majesty's Government what steps they are taking to ensure that environmental, social and governance (ESG) ratings are regulated consistently, regardless of the business model or regulatory status of the provider.

The Government has introduced regulations to bring the provision of Environment, Social and Governance (ESG) ratings into the FCA’s regulatory responsibility. This will strengthen market integrity and boost investor confidence.

Recognising that ESG ratings are provided by a range of different persons, the scope of the regulated activity is designed to be proportionate to the risk of harm, and to avoid dual regulation. In line with this approach, where firms are providing ESG ratings solely as part of another activity for which they are already regulated, they are excluded from the ESG ratings regulations.

The FCA is consulting on draft rules for ESG ratings providers. As part of this process, the FCA will carefully assess whether existing frameworks for regulated products and services adequately address risks of harm where ESG ratings are provided as part of those activities. If the FCA identifies significant gaps, they will consult on changes to enhance those regimes. This approach is designed to minimise burdens on firms whilst consistently addressing risks of harm from all providers, regardless of their business model or regulatory status.