Mansion House: Response to Consultation on Future Regulatory Regime for ESG Ratings Providers

Following its consultation, HM Treasury has published its response to the consultation on the future regulatory regime for ESG ratings providers, along with the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2024. HM Treasury confirms that it will be proceeding with its proposal to bring the provision of ESG ratings within the scope of the U.K. regulatory perimeter. The government welcomes technical comments on the draft regulation by January 14, 2025. The government plans to finalize the legislation in 2025, at which point the Financial Conduct Authority will consult on the specific requirements. HM Treasury expects the overall process of designing, developing and commencing the ESG ratings regulatory regime to take approximately four years.

As part of the design of the future regulatory framework for ESG ratings provision, the FCA is also considering its approach to overseas ESG ratings providers applying for U.K. authorization. This includes exploring whether, according to size, significance, or market impact in the U.K., an ESG ratings provider would be expected to be incorporated in the U.K. HM Treasury is also exploring creating overseas regimes and other access routes into the U.K. market for overseas providers, including a possible market access or overseas regime for ratings issued in overseas jurisdictions.

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