The UK’s Finance Ministry announces plans to regulate ESG ratings later in 2024

The UK’s finance ministry plans to regulate providers of Environmental, Social, and Governance (ESG) ratings to enhance transparency and trust in investment benchmarks.

While no specific timeline was provided, trillions of dollars are invested globally based on these ratings.

Currently, the sector operates without regulation, but the ministry intends to issue a full consultation response and legislative steps later this year.

The move follows the introduction of a voluntary industry code of conduct as an interim measure. However, some in the industry find the delay disappointing, urging clarity on what constitutes an ESG rating and which providers will be regulated.

The European Union recently reached a provisional agreement for ESG ratings, which are based on guidance from IOSCO (International Organization of Securities Commissions), a global securities regulatory body.

The timing of the UK’s regulatory action may be affected by an upcoming general election.