UK FCA consults on rules for ESG rating providers (December 2025)

RegTalk

The UK Financial Conduct Authority (FCA) is consulting on proposed rules for ESG rating providers under the new UK regime for ESG ratings scheduled to go live at the end of June 2028. The FCA's consultation follows the publication by the UK Treasury of legislation bringing ESG rating providers within the UK regulatory perimeter. The FCA consultation closes on 31 March 2026.

Read the full blog below.

The UK Financial Conduct Authority (FCA) is consulting on proposed rules for ESG rating providers under the new UK regime for ESG ratings scheduled to go live at the end of June 2028. The FCA's consultation follows the publication by the UK Treasury of legislation bringing ESG rating providers within the UK regulatory perimeter. The FCA consultation closes on 31 March 2026.

The FCA approach

Currently, UK ESG rating providers can sign up to the ICMA voluntary Code of Conduct for ESG ratings and data products providers which sets out high level principles based on the 2021 recommendations of the International Organization of Securities Commissions (IOSCO). See our earlier briefing for approaches adopted in various jurisdictions to these recommendations.

The Code was an interim measure pending the introduction of the UK statutory framework. The FCA now proposes a proportionate approach aligned with both the Code and the IOSCO recommendations, addressing well-known issues on transparency of ESG ratings, conflicts of interest and weaknesses in systems and controls and governance.

FCA rule proposals

Under the FCA's proposals, UK authorised ESG rating providers would have to comply with "baseline" rules that apply to the majority of UK-authorised firms plus some tailored rules in a new ESG sourcebook:

Proposed rules	Overview
Baseline rules	Threshold conditions (COND) – minimum conditions with which firms must comply to maintain authorisation. Principles for Businesses (PRIN) – overarching obligations for FCA-authorised firms. However, Principle 12 (the Consumer Duty) would not apply ESG rating providers. Systems and Controls (SYSC) – requirements for firms to organise their business, maintain effective internal systems and controls and manage risk. Senior Managers & Certification Regime (SM&CR) – ESG rating providers would be categorised as "core" SM&CR firms, and would have to comply with the regime's requirements for allocation of senior management responsibilities, certification of key staff, and conduct rules. General provisions (GEN) – general rules applicable to all firms, including, e.g., statutory disclosure statements. Anti-greenwashing rule (ESG 4.3.1R) – the rule requires FCA-authorised firms to ensure that any sustainability-related claims about financial products or services are fair, clear and not misleading and that they are consistent with the actual sustainability characteristics of the product or service.
Tailored transparency rules	Minimum public disclosures relating to methodologies, risks, characteristics and objectives of the rating assessment, as well as on the firm's approach to engagement with rated entities, conflicts management and complaints handling. Additional product-level and individual rating-level disclosures for direct users and rated entities. General expectations on how and when information should be disclosed and updated.
Tailored governance and systems and controls rules	Governance requirements to ensure independence, integrity and reliability of ratings and data. Systems and controls for quality control, methodology, data quality and accuracy, record keeping and personal transactions.
Tailored conflicts of interest rules	Rules relating to identification, prevention, mitigation and disclosure of conflicts (in place of the baseline conflict rules in SYSC).
Tailored rules on stakeholder engagement	Requirements for advance notification to rated entities and to provide opportunity for rated entities to correct factual errors and to request (free of charge) the underlying source data used for creating the rating. Requirements for a procedure for receiving and processing stakeholder feedback, and a complaints-handling procedure.

Scope of the ESG ratings regime

HM Treasury laid the draft Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 in October 2025 for approval by both Houses of Parliament. Under the Order, a firm will need to obtain FCA authorisation when it "provides" and "makes available" an ESG rating (as defined in the Order). This requirement will apply to firms:

located in the UK, providing ratings to persons in the UK or overseas; or
located outside the UK, providing ratings to persons in the UK.

The Order also sets out several exclusions, including an exclusion covering the provision of ESG ratings (otherwise than on a standalone basis) in the course of carrying on another regulated activity or ancillary activity, or where the activity is permitted under market access arrangements for overseas providers. The exclusion also covers ESG ratings provided in the course of carrying on activities related to recognised schemes or in connection with AIFs marketed into the UK under the national private placement regime. There is also an exclusion for overseas persons providing ratings to UK persons without remuneration.

The FCA's consultation includes draft perimeter guidance on the application of the Order, including on the application of the regime to overseas firms indirectly providing ratings to UK persons.

Timeline

The FCA plans to engage with firms in early 2026 by means of webinars and roundtables. The consultation closes on 31 March 2026 and the FCA expects to publish its finalised policy in Q4 2026.

From January 2027, the FCA will provide pre-application support for in-scope firms. The FCA authorisations gateway is expected to open in June 2027, allowing in-scope firms a 12-month period in which to seek authorisation.

The regime will enter fully into force on 29 June 2028.

What should providers of ESG ratings be doing now?

Firms providing ESG ratings should map their activities against the Order to establish which will require authorisation or will fall within the exclusion. Firms needing authorisation should review the proposed FCA rules and how they might comply with them.

Overseas firms providing ratings into the UK may consider seeking authorisation for a UK branch. The FCA consultation indicates that branches would be subject to the SM&CR regime (amongst other rules), that the provider's UK presence should be proportionate to its size, complexity and risk profile and that in some cases a UK incorporated subsidiary may be required.

What should users of ESG ratings be doing?

The FCA expects users to benefit from an increase in the transparency and reliability of ratings and indirectly from expected efficiencies in respect of obtaining information and resolving disputes. However, users will still need to assess the relevance and suitability of products. They may wish to distinguish between regulated ratings and unregulated products relying on exclusions and to consider whether any of their rating providers may exit the market or change the way in which they provide services in response to the new regime. The FCA is open to providing further guidance for users in the future should this be deemed useful.

Authors: Caroline Dawson, Sara Evans, Chris Bates, Joe Paddon