[World Corporate Law News] FCA Proposes Rules to Make ESG Ratings More Transparent and Reliable

Editorial Team – [2025] 181 taxmann.com 34 (Article)

World Corporate Law News provides a weekly snapshot of corporate law developments from around the globe. Here’s a glimpse of the key corporate law update this week.

1. Securities Law

1.1 FCA Sets Out Proposals to Make ESG Ratings Transparent, Reliable and Comparable

On December 1, 2025, the Financial Conduct Authority (FCA) published proposals to ensure that environmental, social and governance (ESG) ratings are transparent, reliable and comparable.

These proposals follow the decision by the government to bring ESG ratings within the FCA’s remit, supported by 95% of those who responded to its consultation. Introducing clear, proportionate rules for transparency and governance will help to build the market’s trust in ESG ratings and address concerns.

The FCA’s research shows that around half of those who use ESG ratings are worried about how they are built (55%) and how transparent they are (48%). The proposals aim to address this and focus on 4 areas:

(a) Increased Transparency – allowing easier comparisons for the benefit of both those who use ratings and those who are rated.

(b) Improved governance, systems and controls – to ensure clear decision-making and strong oversight and quality assurance.

(c) Identification and management of conflicts of interest

(d) Setting clear expectations for stakeholder engagement and complaints handling.

Sacha Sadan, director of sustainable finance at the FCA, said:

‘Our proposals will give those who use ESG ratings greater trust and confidence – supporting our goal of increasing trust and transparency in sustainable finance.

‘This will enhance the UK’s reputation as a global sustainable finance hub – attracting investment and supporting growth and innovation.’

The proposals draw on the existing voluntary industry code of conduct and International Organization of Securities Commissions (IOSCO) recommendations to support consistency and international competitiveness. The FCA welcomes feedback on the proposals – the consultation is open until 31 March 2026.

Source – Official Announcement

1.2 ASIC updates guidance on Product Disclosure Statements

On December 3, 2025, the Australian Securities and Investments Commission (ASIC) has published updated Regulatory Guide 168 Product Disclosure Statements – Disclosure and other obligations (RG 168) following consultation with industry.

The updates are aimed at providing clarity and improving industry’s ability to prepare Product Disclosure Statements (PDSs).

ASIC considered industry submissions to Consultation 22 – Proposed update to ASIC’s guidance on Product Disclosure Statements (CS 22) and welcomes the support to simplify the guidance.

In updating RG 168, ASIC:

(a) Incorporated further guidance from regulatory guides, which are to be withdrawn, and made references to ASIC relief instruments that stakeholders indicated were useful.

(b) Updated guidance on compliance risks and considerations for PDSs to clarify what happens if the PDS requirements are not met, and

(c) Updated Appendix 1 with ASIC’s guidelines where a PDS claims that labour standards or environmental, social or ethical considerations are considered in investment decisions to refer to further relevant ASIC guidance.

Background

RG 168 provides guidance on preparing a PDS that complies with the requirements in the Corporations Act 2001. It sets out good disclosure principles and explains how ASIC will monitor the use of PDSs and enforce the requirements.

The following guidance has been withdrawn, and guidance incorporated in the updated RG 168:

(a) Information Sheet 94 Notification requirements for Product Disclosure Statements (INFO 94)

(b) Information Sheet 155 Shorter PDSs – Complying with requirements for superannuation products, simple managed investment schemes and simple sub-fund products (INFO 155)

(c) Regulatory Guide 65 Section 1013DA disclosure guidelines (RG 65)

(d) Regulatory Guide 66 Transaction – specific disclosure for PDSs (RG 66)

(e) Regulatory Guide 197 Warrants – Out of use notices (RG 197) and

(f) Regulatory Guide 219 Non-standard margin lending facilities – Disclosure to investors (RG 219)

Source – Official Guidance

Click Here To Read The Full Article