What the new proposed ESG rating transparency regulation means for UK companies

The UK Chancellor’s recent announcement of stricter regulations for ESG rating agencies marks a significant development in the corporate landscape. This follows the EU’s recent adoption of “Regulation on the Transparency and Integrity of Environmental, Social and Governance (ESG) Rating Activities” or “ESGR”.  Both the UK and EU hope this will increase the consistency and transparency of ESG ratings. The loss of confidence in (financial) rating agencies was a major repercussion of the 2008 financial crisis due to their failure to identify subprime securities: this regulation intends to ensure agencies remain an independent arbiter to bolster investor confidence in ESG-related ratings. It also presents an opportunity for businesses to better identify areas for improvement and make more informed decisions about their sustainability strategies.