UK regulator the Financial Conduct Authority (FCA) has said it will develop a code of conduct for issuers of ESG ratings, ahead of a decision to bring agencies under its regulatory remit.\r\n\r\nAnnouncing a new group to develop a voluntary code with the data and ratings industry, the FCA has appointed the International Capital Market Association and the International Regulatory Strategy Group as secretariat of the group, which will be co-chaired by M&G, Moody\u2019s, London Stock Exchange Group and law firm Slaughter and May.\r\n\r\nThe group is expected to meet for the first time later this year.\r\n\r\nThe FCA has already declared its support for regulation of ESG data and ratings providers, as financial services firms increasingly integrate ESG into their operations. It is waiting for a decision from the UK government to extend its remit, which it said would deliver a proportionate and effective regulatory regime for the sector with a focus on transparency, good governance, management of conflicts of interest, and systems and controls.\r\n\r\n\u201cThis would support greater transparency and trust in the market for ESG data and ratings services,\u201d the regulator said. But in the meantime, it will go ahead with a voluntary code.\r\n\r\n\u201cWhile the government considers this, and to maintain momentum, we have worked to convene, support and encourage industry participants to develop and follow a voluntary code of conduct,\u201d it explained.\r\n\r\nThe regulator said the code will seek to be consistent with international standards and take into account the International Organization of Securities Commissions\u2019 (IOSCO) recommendations as well as developments in Europe and Japan, which it said will help encourage consistent global standards. The European Commission consulted on the prospect of regulating ESG ratings providers earlier this year, with respondents in favour raising the risk of greenwashing as a key reason for regulation, as well as the potential for more transparency behind the data and models used by ESG rating providers.\r\n\r\nEarlier this month, IOSCO launched a call for all voluntary standard-setters in financial markets to promote good practices that counter the risk of greenwashing for ESG ratings and data providers, and asset managers.\r\n\r\nThe FCA\u2019s new group will also include stakeholders including investors, ESG data and ratings providers, and rated entities. The FCA, the Bank of England and other financial regulators and government departments will sit as active observers of the group.\r\n\r\n\u201cThis secretariat offers an in-depth understanding of both the UK and global financial markets, and will ensure an unbiased and balanced representation of all key stakeholder groups,\u201d the FCA said.