On 22 November 2022, the FCA announced that it is introducing regulatory oversight of certain ESG data and ratings providers in the form of a voluntary Code of Conduct (the Code). The Code will be developed by an independent group convened and led by a Secretariat. The FCA has appointed the International Capital Market Association (ICMA) and the International Regulatory Strategy Group (IRSG) as the Secretariat and published the group's terms of reference.
Context
The Code aims to support the FCA’s ESG Strategy by promoting rapid development of best practice. The ESG strategy sets out the FCA’s target outcomes (and actions it expects to take to achieve them) to support the financial sector in driving positive change. See our full article on the FCA’s ESG Strategy here.
The FCA intends the Code to be “internationally consistent” by taking into account developments in other jurisdictions (for example, ESMA’s call for evidence on ESG rating providers that we reported on here) as well as recommendations from the International Organization of Securities Commissions’ (IOSCO). The FCA will engage with the recently published IOSCO call for action to promote good practices to counter the risk of greenwashing which includes a section addressed to ESG rating and data providers. Read our insights on the IOSCO call for action here.
The FCA states that the Code could also apply to ESG data and ratings providers that fall outside the scope of potential future regulation.
What’s next?
The independent group, composed of a range of stakeholders including investors, ESG data and ratings providers and rated entities aims to meet for the first time before the end of 2022. The group will develop the Code under the watchful eye of the FCA, Bank of England and other relevant financial regulators and government departments.
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