The Financial Conduct Authority (FCA) has welcomed new UK Government legislation that formally brings Environmental, Social and Governance (ESG) ratings providers within its regulatory remit. This development represents a major step toward enhancing transparency, reliability and trust across the rapidly growing ESG ecosystem.
ESG ratings play an increasingly significant role in shaping investment decisions, corporate disclosures and capital allocation. However, the absence of a formal regulatory framework has given rise to concerns over inconsistent methodologies and potential conflicts of interest. The new legislation, which has been widely supported by the financial services industry, grants the FCA powers to authorise and supervise ESG ratings providers, ensuring that ratings are robust, transparent and comparable across the market.
Next Steps: FCA Consultation and Rule Development
The legislation, laid before Parliament in October 2025, defines “providing an ESG rating” as a regulated activity under the Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025. Subject to parliamentary approval, the regime is expected to come into force on 29 June 2028, providing a transitional period for rule development and industry preparedness.
In anticipation, the FCA has already commenced work on developing a detailed regulatory framework and intends to launch a public consultation before the end of 2025. This consultation will shape the final rules and authorisation requirements for firms providing ESG ratings to UK users.
The FCA’s proposed approach aligns with the recommendations of the International Organization of Securities Commissions (IOSCO) and will focus on four key regulatory themes:
- Transparency: Clear disclosure of methodologies, data sources and key assumptions.
- Governance: Strong oversight, independence and accountability of rating processes.
- Systems and Controls: Robust data management, validation and audit procedures.
- Conflicts of Interest: Identification and mitigation of potential biases or commercial misalignments.
The FCA also plans to publish detailed guidance to help firms determine whether their activities fall within scope and require authorisation. The proposed framework will cover both UK-based and overseas providers whose ratings are used by UK market participants.
Supporting the UK’s Sustainable Finance Ambitions
This reform is a central element of the UK Government’s wider sustainable finance agenda, which seeks to position the UK as a global leader in high-integrity, transparent ESG markets. By bringing ratings providers under regulatory oversight, the UK aims to strengthen investor confidence, reduce greenwashing risks and improve the comparability and reliability of ESG data used by asset managers and institutional investors.
The initiative also complements other UK sustainability measures, including the Sustainability Disclosure Requirements (SDR) and investment labels regime, helping create a coherent, trusted framework for sustainable finance.
What Firms Should Consider
While the regime is not expected to be implemented until 2028, firms should take early action to prepare for the upcoming regulatory requirements by:
- Assessing whether their ESG-related activities may fall within the new regulated perimeter;
- Reviewing governance structures, data management and conflict-of-interest frameworks;
- Engaging with the FCA’s upcoming consultation to help shape proportionate, practical rules; and
- Reviewing reliance on third-party ESG ratings providers and ensuring due diligence over methodology and quality.
How Complyport Can Help?
Complyport is well-positioned to support your firm in navigating the compliance obligations arising from this regulatory development. We can provide:
- FCA Authorisation Support: End-to-end support with preparing and submitting FCA authorisation applications for ESG ratings providers, including perimeter scope assessments and readiness reviews.
- Regulatory Guidance: Expert advice on the FCA’s expectations across areas such as governance, ICARA, Consumer Duty and conflict-of-interest management.
- Ongoing Support: Continuous compliance assistance to ensure your firm’s processes remain aligned with evolving FCA expectations.
- Compliance Documentation: Review and enhancement of policies, governance structures and internal procedures.
- Training: Bespoke workshops designed to embed best practices, improve oversight and foster a strong compliance culture.
Contact Us
To understand how these regulatory developments may impact your business and to discuss your compliance needs, contact Complyport today to book a meeting with one of our Subject Matter Experts.
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