Environmental ratings are becoming big business as companies seek proof of sustainable and socially beneficial conduct, both to avoid accusations of greenwashing and convince investors and customers they have enduring value. Firms that issue ratings on environmental, social and governance (ESG) performance are set to be regulated in the EU and U.K.
The drive to extend regulatory powers reflects concerns that ESG ratings are increasingly influencing investment and capital allocation decisions. Without regulation, there are fears that investors risk being misled by inconsistent and opaque ratings methodology and disclosure. The U.K. government has also said increasing trust in ESG ratings is part of its strategy for economic growth.
