Britain to regulate ESG ratings

Trillions of dollars globally have flowed into company shares, with asset managers using ESG ratings to help pick stocks. — Reuters

LONDON: Britain’s finance ministry says it will introduce regulation for providers of environmental, social and governance (ESG) ratings on companies to improve “clarity and trust” in benchmarks widely used to steer investments, but gave no specific timeline.

Trillions of dollars globally have flowed into company shares, with asset managers using ESG ratings to help pick stocks.

The activity of compiling ESG ratings, a sector that includes providers such as MSCI, S&P, Morningstar, London Stock Exchange Group and others, is unregulated.

The ministry said it was issuing a “holding” statement following up on its public consultation last year, and since then a voluntary industry code of conduct has been introduced as a stop gap.

“A full consultation response and legislative steps will follow later this year,” the ministry said in a statement.

The European Union approved its first mandatory rules last month to regulate ESG ratings. — Reuters