ESG rating agencies may face regulation as the Government seeks to tighten the current voluntary code of conduct.

Given the power that ESG raters have over investment, it has long been an issue that there is no real oversight to the companies or their methodologies. The Government is also mindful that other countries and the EU have moved faster here.

The previous government had already opened a public consultation on plans and now Rachel Reeves appears to want to accelerate progress asking the Treasury to form a regulatory regime for these rating providers.

Obtaining a recognised standard would potentially encourage investment and help quell the ocean of ‘greenwash’ that currently dogs the sector. It is expected that it would be under the supervision of the Financial Conduct Authority (FCA) and could be expected in 2025.

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