The UK’s Financial Conduct Authority (FCA) has published its final rules bringing ESG ratings providers under direct regulation for the first time.
The framework aims to improve the transparency, reliability and comparability of ESG ratings, which institutional investors and asset managers use to inform investment decisions and assess sustainability risks.
The final rules follow broad industry support for the proposals, although respondents previously raised concerns about implementation.
Norges Bank Investment Management (NBIM) backed greater transparency and reliability in ESG ratings, while the Society of Pension Professionals (SPP) highlighted challenges around access to underlying data and the potential burden on smaller providers.
In response to the original proposals, NBIM said the rules should “enhance transparency, reliability, and integrity in ESG ratings”, while supporting the “well-functioning of financial markets”.
Laura Dawes, director of authorisations and sustainable finance at the FCA, said: “Trusted information is essential for well-functioning markets. These rules will help improve transparency and raise standards across the ESG ratings market while supporting competition, innovation and growth.
“Firms should check now whether they are in scope and start preparing for authorisation. We’ll continue to provide practical support to help them prepare.”
“These rules will help improve transparency and raise standards across the ESG ratings market while supporting competition, innovation and growth”
Laura Dawes at FCA
The framework introduces requirements covering transparency, governance, systems and controls, conflicts of interest, and engagement with users of ESG ratings and rated entities. The FCA said the requirements would be proportionate to providers’ size and activities and informed by international and existing standards.
The rules regulate how ESG ratings are produced, governed and communicated, rather than prescribing particular sustainability views or methodologies.
The framework comes as the FCA places greater emphasis on implementing sustainable finance rules in practice. Earlier this year, the regulator’s head of department for sustainable finance, Alicia Kedzierski, said it was focusing on improving investor outcomes, signalling a shift beyond ESG rulemaking towards real-world impact.
“As the market matures, we are looking at how [sustainability disclosure requirements] are working in practice to ensure investors receive accurate, decision-useful information,” she said.
ESG ratings providers operating in the UK market will need to apply for FCA authorisation from 24 June 2027. The regime will take effect on 29 June 2028, from which date providers will need the relevant FCA permission to continue operating, unless an exemption applies.
