Here is a summary of ESG announcements from the European Union’s European Securities and Markets Authority (“ESMA”) and the Financial Conduct Authority (“FCA”).
European Union
On June 27, the European Securities and Markets Authority (“ESMA”) published a letter it sent to the European Commission (“EC”) on June 24 on the outcome of ESMA’s call for evidence on the market characteristics of environmental, social and governance (“ESG”) ratings and data providers operating within the European Union (“EU”). ESMA launched its call for evidence in February 2022, and it received 154 responses.
ESMA concludes that the feedback indicates the market for ESG ratings and data providers is an “immature but growing market” that has “seen the emergence of a small number of large non-EU headquartered providers” and that the market resembles that which currently exists for credit ratings. The letter also states that there are currently 59 active ESG ratings providers operating in the EU.
ESMA’s findings include the following:
ESMA has stated that it will continue to support the EC in its assessment of the need for introducing “regulatory safeguards for ESG ratings.” It seems likely, based on the direction of travel, that providers of ESG ratings used in the EU will, in the near future, be brought within the scope of the EU financial regulation.
United Kingdom
On June 29, the Financial Conduct Authority (“FCA”) announced the publication of its consultation feedback on ESG integration in UK capital markets. Furthermore, the FCA set out its policy response and “potential next steps.” On the same day, the FCA published its Primary Market Bulletin newsletter, which further elaborated on the FCA’s response to feedback and gave some clarity on the regulator’s expectations of issuers of ESG-labelled debt instruments.