UKSIF response: HM Treasury consultation on ESG ratings draft Statutory Instrument (SI)

The UK Sustainable Investment and Finance Association (UKSIF) welcomes the regulatory clarity provided by the draft Statutory Instrument (SI) from HM Treasury (HMT) to propose the extension of the Financial Conduct Authority’s (FCA’s) regulatory perimeter to include ESG ratings products in the market.

ESG ratings continue to play an important role in our industry and we are pleased to see government make further progress in designing the UK’s new regulatory framework. It remains crucial in our view for investors and other users of ratings to have full confidence in ESG ratings, including their objectives and underlying methodologies, as ratings are increasingly utilised as an important tool to inform capital allocation decisions in the economy, comply with regulatory frameworks across markets and reporting purposes; integration into investment processes or stewardship strategies; guiding internal decision making; and benchmarking sustainability performance.

Broadly speaking, we are largely supportive of many of the points and detail outlined in the draft SI, which we believe can help foster an objective and high-quality framework for ESG ratings regulation in the UK, while importantly representing alignment in many respects with the EU’s regulatory approach and the International Organisation of Securities Commissions’s (IOSCO’s) recommendations.

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