ESG Ratings consultation response submitted
Posted on: April 1st, 2026
The FCA’s ESG Ratings Consultation (CP25-34) closed yesterday.
I was unable to spend as much time on this as I might have liked – as I believe the ESG Ratings Consultation is massively important – however I did submit a few pages of comments just ahead of last night’s deadline. By means of introduction – I do think this paper is good. And I think it will help, however my focus was primarily on areas that might be considered further.
Some of the main points in my response were:
- I have been concerned about ESG ratings agencies ability to distort markets and mislead / confuse clients for many years.
- SRI Services may be impacted by these rules as our SRI Styles might be viewed as ‘ratings’ – as the FCA’s definition includes ‘opinions’ and ‘classifications’ . (This does not overly bother me, however it might impact how we operate from 2027/8).
- The FCA is right to focus on transparency. The purpose of the various ratings services vary, and assets are dynamic and complex – so seeking ‘perfect data’ and or ‘perfect alignment of ratings’ is not realistic. Being open about methodologies and supporting clients better is however realistic, necessary and very ‘doable’.
- I am sceptical about the extent to which ‘trade secrets’ and ‘commercial sensitivities’ are real and encourage the FCA to look at such claims with a sceptical eye. I agree these might exist on occasions, but the line between ‘commercial interests’ (including the desire to save money) and genuine commercial sensitivities can easily and intentionally be blurred.
- Ratings agencies made a great deal of money fuelling the ESG boom, and whilst no one can be expected to have a crystal ball, their modus operandi was not always exemplary. Relevant ratings information and evidence should be able to be shared through the investment chain in order to improve trust, enable advisers meet their Consumer Duty obligations and help clients make informed decisions. Ratings agencies should now focus on ensuring ‘information black holes’ and other gaps do not appear between themselves and ultimate / end clients (individual investors).
- The regulator should say more about AI here. It will be commonly used by ratings agencies. Inputs to AI agents are likely to be dominated by information published by (SEO savvy) large corporates. The voices of those who are negatively impacted by corporate activity, such as indigenous populations, is far less likely to be found by AI – and may therefore skew ratings. (Ratings need to be derived from the ‘complete picture’ in 0rder to be reliable.)
- The new rules need to ensure barriers to entry, including compliance costs, are not prohibitively high as this would benefit incumbents and be to the detriment of smaller companies and newer entrants.(I have sought clarification on what costs might be incurred by businesses such as ourselves). This area thrives on bespoke services, diversity of opinion, and innovation.
See FCA consultation link:
Blog amended 20/4/26