15 November 2024
If you are covering the government’s consultation response and draft statutory instrument for the regulation of ESG ratings providers, please find below a comment from Gemma Woodward, head of responsible investment at Quilter Cheviot:
“It is pleasing to see the new government pressing ahead with the regulatory regime for ESG ratings providers. Firms offering ratings on environmental, social and governance factors have grown rapidly in recent years, and the differences in the methodologies behind these ratings can be problematic. Much of this is down to data sets being interpreted in very different ways, so a coherent and pragmatic set of guidelines will help to bring about a standardisation.
“With deadlines for the Sustainable Disclosure Requirements also upon us, this has come at the right time given the sometimes over-reliance asset managers place on these metrics and ratings to meet their own regulatory reporting.
“It does appear the government has listened and introduced a sensible list of those excluded from proposed regulation, including internal ESG assessments. We need to make sure that capital allocators are not overburdened and can make decisions on responsible and sustainable investments in a timely manner – that is the only way to help money flow into companies and projects that need it most.
“That said, this is not going to be a quick process, with the government indicating it will take four years to design and bring in. Clearly there will be teething issues with it all too, as with any regulation, and as such we may not see any improvement in the current regime for some time.”
