The FCA has published proposals to ensure that environmental,
social and governance (ESG) ratings are transparent, reliable and
comparable - a move that is estimated to deliver around £500m in
net benefits over the next decade.
ESG ratings inform investment decisions, risk management and
regulatory reporting. Global spending on ESG data, including
ratings, is projected to reach $2.2bn in 2025.
These proposals follow the decision by the government to bring
ESG ratings within the FCA's remit, supported by 95% of those who
responded to its consultation. Introducing clear, proportionate
rules for transparency and governance will help to build the
market's trust in ESG ratings and address concerns.
The FCA's research shows around half of those who use ESG ratings
are worried about how they are built (55%) and how transparent
they are (48%). The proposals aim to address this and focus on 4
areas:
- Increased transparency – allowing easier comparisons for the
benefit of both those who use ratings and those who are rated.
- Improved governance, systems and controls – to ensure clear
decision-making and strong oversight and quality assurance.
- Identification and management of conflicts of interest.
- Setting clear expectations for stakeholder engagement and
complaints handling.
There are also proposals on applying existing FCA rules to firms
coming into the FCA's remit. The proposed rules are designed to
be proportionate to business size and risk.
Strengthened market trust through proportionate oversight
benefits business. This will reinforce the UK's reputation as a
global sustainable finance hub, supporting innovation and
continued growth. It will also support the government's
commitment to sustainable finance in its industrial
strategy.
Sacha Sadan, Director of Sustainable Finance at the FCA, said:
'Our proposals will give those who use ESG ratings greater trust
and confidence – supporting our goal of increasing trust and
transparency in sustainable finance.
'This will enhance the UK's reputation as a global sustainable
finance hub – attracting investment and supporting growth and
innovation.'
The proposals draw on the existing voluntary industry code of
conduct and International Organization of Securities Commissions
(IOSCO) recommendations to support consistency and international
competitiveness.
The FCA welcomes feedback on the proposals – the consultation is
open until 31 March 2026.
Final rules are expected in Q4 2026, with the new regime coming
into effect from June 2028. The FCA will provide support for
those firms wishing to become authorised as an ESG rating
provider.
Notes to editors
- ESG ratings are evaluations of a company, product or fund's
performance across environmental, social and governance factors.
- This follows the Government's decision to bring ESG ratings
within the FCA's remit, as set out in legislation published in
October 2025.
- The FCA proposals are aligned with international standards,
including International Organisation of Securities
Commissions (IOSCO)
recommendations and the industry-led
ICMA Code of
Conduct.
- Our net benefit statistic and the underlying analysis,
assumptions and methodologies can be found in our cost-benefit
analysis (CBA).
