(Adds regulatory letter to sector)
By Huw Jones
LONDON, March 20 (Reuters) - Compilers of benchmarks
used to measure companies' environmental, social and governance
(ESG) performance will be punished if they don't improve their
"poor" disclosures to investors, Britain's financial watchdog
said on Monday.
Regulators are tightening ESG rules to crack down on
greenwashing, or the making of inaccurate climate-friendly
claims by companies and products to attract investors.
ESG benchmarks are scores used to measure the progress
financial products, companies and markets are making towards a
net-zero economy.
The Financial Conduct Authority said in a letter to ESG
benchmarks compilers that a preliminary review had shown that
the quality of their disclosures was poor.
There were often instances where compilers did not provide
sufficient detail and description of the ESG factors considered
in their methodologies, the letter said.
"Given the importance of ESG benchmarks and our initial
supervisory findings, which indicate the potential for
widespread failings, we will be doing more work in this area
across the portfolio," the letter said.
"Where firms fail to consider our feedback, we will deploy
our formal supervisory tools and, where appropriate, consider
enforcement action."
"We expect you, your senior leadership, and your Board to
carefully consider the messages we have set out as they pertain
to your business," the letter said.
"You should ensure that you have appropriate strategies to
address them, and you should be prepared to explain these
strategies at our request."
Monday's letter follows a previous warning to the sector in
September last year.
(Reporting by Huw Jones; Editing by Kevin Liffey and Jan
Harvey)
Messaging: huw.jones.thomsonreuters.com@reuters.net))
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