LONDON, March 6 (Reuters) - Britain's finance ministry

said on Wednesday it will introduce regulation for providers of

environmental, social and governance (ESG) ratings on companies

to improve "clarity and trust" in benchmarks widely used to

steer investments, but gave no specific timeline.

Trillions of dollars globally have flowed into company

shares, with asset managers using ESG ratings to help pick

stocks.

The activity of compiling ESG ratings, a sector that

includes providers such as MSCI ( MSCI ), S&P, Morningstar ( MORN ), London Stock

Exchange Group ( LDNXF ) and others, is unregulated.

The ministry said it was issuing a "holding" statement

following up on its public consultation last year, and since

then a voluntary industry code of conduct has been introduced as

a stop gap.

"A full consultation response and legislative steps will

follow later this year," the ministry said in a statement.

The European Union approved its first mandatory rules last

month to regulate ESG ratings, going further than Britain's

voluntary industry code, though both sets of norms are based on

guidance from IOSCO, a global securities regulatory body.

"The holding statement from government is somewhat

disappointing given that the consultation closed last summer,"

said Lorraine Johnston, head of ESG regulation at law firm

Ashurst, adding that it left industry in a "waiting game".

"What industry is really looking for is the

clarification around what will constitute an ESG rating and who

will be in scope as an ESG rating provider for such ESG

ratings," she said.

Consultants KPMG said raters expect rules that require

them to formalise governance structures and publish

methodologies to increase transparency and comparability of

ratings.

Britain is facing a general election, expected later

this year, which could impact the timing of legislation.