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FCA: ESG integration in UK capital markets

05 July 2022

In CP21/18, published in June 2021, the FCA set forth a discussion on environmental, social and governance (ESG) integration in UK capital markets.

Views were sought from stakeholders on the following topics:

  1. Issues related to green, social, sustainability and sustainability‑linked debt instruments (ESG‑labelled debt instruments), including:
  2. Prospectus and ‘use of proceeds’ (UoP) bond frameworks
  3. The role of verifiers and second party opinion (SPO) providers
  4. ESG data and rating providers

Use of Proceeds Bonds


To enhance transparency and consistency, feedback received and encouragement by the FCA for issuers and their advisors to adhere to existing industry principles for ESG‑labelled debt instruments, notably ICMA’s Principles and Guidelines for UoP bonds.

It was noted by the FCA that prospectus disclosures clearly stated that an issuer is not obligated to use the proceeds in a specific manner, the UoP bond framework document often implies a stronger commitment. Firms must therefore meet their current obligations regarding prospectus advertisements so as to prevent investors from making investment decisions based on information that is inconsistent with the prospectus and hence the use of guidelines would be efficient in this regard.

The FCA therefore 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.

Regulatory oversight over ESG Data Providers

The FCA sees a clear rationale for regulatory oversight of certain ESG data and rating providers – and for a globally consistent regulatory approach informed by the recommendations on ESG data and ratings developed by the International Organization of Securities Commission (IOSCO) in 2021.

The FCA supports the Government’s consideration of bringing ESG data and rating providers within the FCAs regulatory perimeter and sets forth considerations as part of the potential scope of regulatory oversight over ESG data providers:

1.       Whether transparency, governance and management of conflicts of interest are the right aspects of ESG data and rating providers’ operations and activities to prioritise in regulatory oversight, and if not, what other aspects should be considered

2.       Whether and how regulatory priorities should differ between ESG rating providers and other ESG data providers

3.       The similarities and differences between the policy issues that arise for ESG rating providers and those that arise for CRAs, and how far these similarities and differences might inform the appropriate policy


Several respondents noted that any regulatory approach would have to accommodate appropriate protection of intellectual property

The FCA will continue to work with Treasury to determine whether ESG data providers should be brought into scope of FCA regulatory oversight.




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