Earlier this year, the Financial Conduct Authority expressed its support for the regulation of ESG data and ratings agencies after consulting the industry.
Ratings are increasingly used by the investment sector as ESG is embedded into companies’ activities and product offerings.
However, the regulator acknowledged that though there is a very low correlation between different providers’ ESG ratings on any given entity, it does not think this is a potential issue for the industry.
This reflects the “inherent multidimensionality of ESG”, the FCA said, as well as the always-improving methodology.
As long as the providers are transparent about their methodology and the data they use, have robust governance, manage conflicts of interests and have systematic processes and controls, these ratings differences are not considered as a source of harm.
sally.hickey@ft.com
