In 2021, fintech unicorn Wise made headlines when it chose to go public on the London Stock Exchange (LSE) through a direct listing — a vote of confidence in the UK capital markets. Fast-forward to 2025, and the company is now considering a switch to the US, joining a wave of UK firms drawn to the deeper pools of capital across the Atlantic.
Wise isn’t alone. Heavyweights like ARM, CRH, and Flutter Entertainment have either already shifted to the US stock exchanges or are seriously considering it. Their motivations span valuation, investor reach, and sector alignment — but an underappreciated factor sits in the background: ESG reporting obligations.
While often framed as a compliance challenge, ESG has become a strategic lever for IPO success. For finance leaders at the helm of ESG-heavy sectors — infrastructure, fintech, clean tech, and beyond — understanding how regulatory landscapes shape IPO decisions is increasingly essential.
The ESG IPO Decision: What Finance Leaders Need to Consider
An IPO is no longer just a financial milestone — it’s a public unveiling of how your business operates under scrutiny. ESG, once relegated to sustainability teams, is now a core investor metric, a valuation signal, and a litmus test for long-term resilience.
For CFOs and sustainability leaders, the ESG landscape presents a conundrum:
- The UK has clearer, more consistent ESG rules — but they’re stringent.
- The US offers greater investor access, but its ESG regulation is still evolving and politically polarised.
This creates a paradox. Companies with mature ESG strategies may favour the UK’s transparency, while those with fragmented or immature ESG data might be drawn to the flexibility of the US, even if it comes at the cost of long-term scrutiny.
As global investors increasingly price in climate risk and social governance factors, audit-ready ESG disclosures are no longer “nice to have” — they are fundamental to valuation and investor confidence.
Ask Rio: What ESG frameworks are required for a UK IPO?
To list on the London Stock Exchange’s Premium Segment, companies must align with the Task Force on Climate-related Financial Disclosures (TCFD). The UK’s Sustainability Disclosure Requirements (SDR) are also incoming, creating a cohesive but demanding ESG regime. Public companies are expected to:
- Disclose climate-related risks and opportunities
- Demonstrate board-level oversight of sustainability
- Provide forward-looking emissions data
Failure to do so risks investor pushback, regulatory sanctions, and even delisting in severe cases.
Why the US Is Attractive – Even for ESG-Minded Firms
It’s easy to see why the NASDAQ or NYSE is attractive. The US boasts:
- Larger capital markets
- Greater liquidity
- A broader investor base for tech and high-growth companies
But here’s the twist: even ESG-ambitious firms like ARM and CRH — both with sophisticated sustainability strategies — have chosen the US. Why?
Because US investors, while increasingly ESG-aware, are less regulated in how they weigh these disclosures.
For companies looking to buy time while building ESG maturity, this can be an attractive window — but it's a short-term gain with long-term exposure.
Ask Rio: Is ESG regulation stricter in the UK than the US?
Yes. In the UK:
- TCFD-aligned disclosures are mandatory for large listed firms
- ESG is a standard part of the Financial Conduct Authority (FCA) listing regime
- The government is pushing for ISSB alignment and green taxonomy clarity
In contrast, US ESG regulation is still patchy. While the SEC’s climate rule mandates Scope 1 and 2 disclosures for large firms, it exempts many from Scope 3 (indirect emissions). There is also no federal equivalent to the UK’s mandatory governance and climate risk reporting frameworks.
This discrepancy creates both opportunity and risk for companies navigating cross-border listings.
The Hidden Costs of Going Public Without ESG Readiness
Listing in a jurisdiction with looser ESG rules may feel like a reprieve — but without robust systems in place, ESG can quickly become a drag on IPO readiness.
Common pitfalls include:
- Dispersed sustainability data across teams or spreadsheets
- Difficulty producing audit-ready documentation for investors
- Missed signals around emerging ESG litigation or greenwashing risk
- Slower response to investor due diligence on emissions, governance, or ethical sourcing
Consider that nearly 90% of institutional investors say they are more likely to invest in companies with transparent ESG practices (Morningstar, 2023). ESG isn’t just a compliance requirement — it’s a cost of capital issue.
Ask Rio: What is audit-ready ESG reporting?
Audit-ready ESG reporting means your sustainability data is:
- Traceable: Linked directly to source systems or third-party data
- Standardised: Aligned with frameworks like TCFD or ISSB
- Verifiable: Documented with evidence suitable for internal or external audit
- Exportable: Available in investor-grade formats (e.g., IPO prospectuses, data rooms)
With increasing regulatory oversight, audit-ready reporting is no longer optional. It’s the foundation of credible sustainability disclosure.
How Rio AI Helps You Go Public With Confidence
At Rio AI, we help finance and sustainability teams prepare for capital events like IPOs with confidence.
Our platform supports:
- Real-time ESG data aggregation across business units
- Automated mapping to regulatory frameworks like TCFD and SDR
- Audit-ready documentation, ready for scrutiny from boards, regulators, or investors
- One-click exports to support due diligence and investor relations
Whether you’re listing in London or New York, our tools ensure you can show not just what you’ve done — but how you’re building long-term resilience.
ESG Isn’t Just Compliance — It’s Capital Strategy
Wise may be seeking a US listing to capture a higher valuation — but no matter where a company lists, the ESG story will follow.
Regulation might be lighter in some regions, but investor expectations are converging. ESG isn’t going away. It’s becoming more sophisticated, and more critical to access to capital.
At Rio AI, we believe that companies who embrace ESG not just as a reporting requirement but as a business strategy will be the ones that thrive through IPO and beyond.
Whether you’re preparing to list, raise a funding round, or just future-proof your sustainability function, Rio AI is here to help you tell a credible, auditable, and investor-ready ESG story.
