United Kingdom (and EU regulation)

FCA Feedback Statement 22/4 ‘ESG integration in UK capital markets’

By Simon Lovegrove (UK) and Daniel Nevzat (UK) on June 30, 2022 Posted in ESG, United Kingdom

On 29 June 2022, the FCA published Feedback Statement 22/4 ‘ESG integration in UK capital markets’ (FS22/4).

In FS22/4 the FCA provides feedback on the discussion chapter of Consultation Paper 21/18 ‘Enhancing climate-related disclosures by standard listed companies and seeking views on ESG topics in capital markets’ which covered environmental, social and governance (ESG) integration in UK capital markets and sets out potential next steps. The FCA has also published Primary Market Bulletin 41 (PMB 41) which elaborates on its response to stakeholder feedback and clarifies expectations of issuers of ESG-labelled debt instruments.

The policy actions the FCA is taking and its future direction are described in chapter 4 of FS22/4 with a summary provided at paragraph 1.26.

The policy actions include:

In PMB 41 the FCA reminds issuers, their advisors and other relevant market participants of their existing obligation to ensure any advertisement issued in relation to an offer to the public or admission to trading on a regulated market is not inaccurate or misleading, and is consistent with the information contained in the prospectus. Where advertisements do not meet the FCA’s expectations, it will consider the case for market oversight or enforcement actions.
In PMB 41 the FCA encourages issuers and their advisors to consider relevant industry standards – such as the ICMA Principles and Guidelines for green, social, and sustainability bonds – when issuing ESG‑labelled debt instruments.
ESG data and rating providers. The FCA sees a clear rationale for regulatory oversight of certain ESG data and rating providers. It will continue to work with HM Treasury, who are considering bringing ESG data and rating providers within the regulatory perimeter.

The FCA’s future direction includes the FCA taking steps to develop a regulatory regime should HM Treasury extend the regulatory perimeter to certain ESG data and rating providers. It may also consider further with HM Treasury the case for regulatory oversight of verifiers and second party opinion providers.