Update on UK ESG ratings regulation: FCA consults on rules to improve transparency and trust in the ESG ratings market

From 29 June 2028, any firm wishing to provide certain types of ESG ratings in the UK will need authorisation from the Financial Conduct Authority (FCA). This follows from recent legislation, The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 (the “Order”) (which has an accompanying Explanatory Memo), that brings the provision of an ESG rating into regulation under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) and within the FCA’s regulatory perimeter. The FCA is currently consulting on rules that would form its approach to ESG ratings regulation.

What ESG ratings would fall in scope?

The Order brings the provision of an ESG rating into regulation under the RAO by making it a specified kind of activity, when that rating is likely to influence a decision to make an investment specified in Part 3 of the RAO. 

ESG ratings that fall within the new regulated activity are defined as assessments regarding one or more ESG factors, which are prepared using: 

• an “established methodology” – involving techniques and procedures systematically utilised to identify, collect, analyse and interpret data in order to produce a rating; and
• a “defined ranking system of rating categories” – examples of which might include colour coding, scores, or other classes expressed using symbols, numbers or letters. 

Under the Order, a firm will “provide” an ESG rating only if it both “produces” the rating and “makes it available”. Therefore, firms that only distribute ESG ratings produced by others are not captured. 

Where a UK-based ESG ratings provider supplies ESG ratings – whether paid or free – to any customer, whether located in the UK or overseas, this activity will fall within scope. Where an ESG rating is provided to a UK customer by an overseas provider, this activity will also fall within scope, unless the ESG rating is provided to a UK customer by an overseas provider for free, in which case this activity will be out of scope.

Are there any exclusions?

Yes, which mainly reflect that the regime is intended to be proportionate to the risk of harm, avoid dual regulation and maintain consistency with existing regulatory frameworks. For example, one exclusion is where a person provides an ESG rating as part of another financial service or activity that is already regulated by the FCA. Another exclusion is for accreditation and certification activities, where the purpose is not to influence a decision to make a specified investment, such as those designed to inform corporate strategy or personal purchases.

Will there be any transitional provisions?

The Order includes transitional and savings provisions to allow persons who are within scope of the new regulated activity and have applied for the relevant permission (including variation of pre-existing permission) to continue providing ESG ratings during a limited period following commencement, subject to appropriate conditions and FCA supervision.

What is the FCA’s proposed approach, subject to consultation?

At high level, the FCA is seeking to make ESG ratings more transparent, reliable and comparable. The FCA’s proposed rules for rating providers include the following elements:

• Transparency: This entails minimum disclosure requirements for methodologies, data sources and objectives, so users better understand the ratings and rated entities understand how they are assessed.
• Systems and controls: These comprise requirements for robust arrangements to ensure the integrity of the ratings process, including quality control, data validation and methodology reviews.
• Governance: This encompasses requirements to maintain operational responsibility over the ratings process, including any outsourcing, to ensure appropriate oversight and compliance with the regime.
• Conflicts of interest: These are requirements to identify, prevent, manage, and disclose conflicts of interest at the organisational and personnel level, to maintain the ratings’ independence and integrity.
• Stakeholder engagement: These include requirements to provide rated entities with the opportunity to correct factual errors, procedures to allow other stakeholders to provide feedback and a fair complaints-handling procedure.

What is the timing of the FCA’s rules?

The FCA’s consultation closes on 31 March 2026. The FCA will use the feedback received to inform the final rules, which will be published in a Policy Statement in Q4 2026.

Firms will have a period of time to familiarise themselves with the rules. The FCA will open its authorisations gateway in June 2027, a year before the regime comes into effect in June 2028.

Need advice?

For further information or tailored advice, please contact Kerry Stares, or your usual Charles Russell Speechlys contact.