The IRSG has submitted a response to the FCA's consultation on its proposed approach to regulating ESG ratings providers (CP25/34).
In its response, the IRSG supports the FCA's measured and principles-based proposals, building on the voluntary Code of Conduct for ESG data and ratings providers, while emphasising the need for proportionality, international coherence and clarity to support effective implementation and market competition.
Key points from the response include:
- Support for proportionate regulation of ESG rating providers to enhance transparency, governance and quality, without stifling innovation or competition.
- The importance of international alignment, including consideration of equivalence or third‑country access mechanisms, to avoid duplication and support cross‑border activity given the emergence of ESG ratings regimes in other jurisdictions, notably the EU.
- The need for a proportionate approach to authorisation, supervision, fees and SMCR requirements, particularly for smaller providers and those supervised outside the Financial Services and Markets Act.
- A pragmatic approach to data disclosure requirements, ensuring transparency for users and rated entities while protecting the independence of ratings and avoiding strategic misuse or delays.
- The value of further FCA guidance and practical examples to support consistent interpretation across different ESG ratings business models, including analyst‑driven and model‑based methodologies.
The IRSG highlights the importance of ongoing supervisory dialogue and clear guidance to ensure the new regime is implemented in a proportionate, coherent and internationally competitive way, supporting high‑quality ESG ratings while maintaining market choice and innovation.
TheCityUK jointly runs the IRSG with the City of London Corporation to promote sustainable economic growth and an international framework that facilitates open and competitive capital markets globally.