FCA published Feedback Statement on ESG integration in UK Capital Markets


The FCA published its Feedback Statement (FS) on ESG integration in UK capital markets on the 29th June 2022. The initial consultation sought views from stakeholders on certain issues relating to ESG-related debt instruments (e.g., green and social bonds) and the role of ESG data and ratings providers, topics the FCA identified as “active areas of industry debate”. The Feedback Statement provides a summary of the feedback the FCA has received in response to the June 2021 consultation and set out the FCA’s proposed next steps in relation to the issues raised.

The FCA has set out further detail of its approach in Primary Market Bulletin 41 (PMB) which has been published alongside the Feedback Statement.

In the PMB, the FCA:

  • encourages issuers of ESG-labelled UoP debt instruments to consider voluntarily applying or adopting relevant industry standards, such as the Principles and Guidelines that the International Capital Market Association (ICMA) has developed for green, social, and sustainability bonds;
  • reminds issuers, their advisors and other relevant market participants of their existing obligation to ensure any advertisement is not inaccurate or misleading, and is consistent with the information contained in the prospectus; and
  • encourages issuers and their advisors to consider verifiers’ and assurance providers’ expertise and professional standards, and to engage with SPO providers and verifiers who adhere to appropriate standards of professional conduct, such as ICMA’s Guidelines for External Reviewers.

In relation to ESG data and rating providers, noting a clear rationale for regulatory oversight and global consistency, the FCA will continue to work with the Treasury, who are considering bringing ESG data and rating providers within the FCA’s regulatory perimeter. The Feedback Statement noted that 39 of the 44 respondents to the consultation backed either a voluntary best practice code for ESG data and ratings providers or formal regulation of the industry.

Should the FCA’s regulatory perimeter be extended to cover ESG data and ratings providers, then the FCA specified that it will “take the necessary steps” to develop and consult on an effective regulatory regime, focusing on the areas described in the International Organization of Securities Commissions (IOSCO) recommendations. Those areas include transparency, good governance, management of conflicts of interest, and systems and controls. It is noted that such a regulatory regime would likely take a number of years to develop and implement; in the meantime, the FCA proposes to work with the Treasury to organise, support, and encourage industry participants in creating a voluntary code of conduct addressing matters similar to those in the IOSCO recommendations.

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