UK FCA Introduces First ESG Ratings Regulations, with Mandatory Authorisation from 2028

The UK's Financial Conduct Authority (FCA) has published final rules bringing environmental, social and governance (ESG) ratings providers under its regulatory supervision for the first time. Announced on 3 November 2026, the framework aims to improve the transparency, reliability and comparability of ESG ratings used by investors, lenders and other financial market participants. Under the new regime, firms providing ESG ratings in the UK will generally require FCA authorization from 29 June 2028, unless an applicable exclusion applies.

The regulations follow legislation introduced by the UK government in October 2025 and an FCA consultation conducted between December 2025 and March 2026. The final framework, published under Policy Statement PS26/22, establishes requirements for how ESG ratings are produced, governed and communicated, while allowing providers to retain different assessment methodologies.

 

New Rules Address Transparency and Conflicts of Interest

 

The framework introduces requirements covering disclosure transparency, corporate governance, operational systems and controls, management of conflicts of interest, and engagement with ratings users and rated entities. These measures are intended to strengthen confidence in ESG assessments, which increasingly influence investment decisions, portfolio construction and financial risk management.

The FCA has designed the requirements to be proportionate to providers' size and activities, drawing on international standards, including recommendations from the International Organization of Securities Commissions (IOSCO). Laura Dawes, Director of Authorizations and Sustainable Finance at the FCA, said, "Trusted information is essential for well-functioning markets." The regulator has emphasized that the framework governs how ratings are produced and communicated rather than prescribing a particular sustainability assessment methodology.

 

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ESG Ratings Providers Face New Authorization Requirements

 

The rules apply to firms carrying out regulated ESG ratings activities in the UK, including relevant assessments, scores and opinions concerning environmental, social and governance characteristics. The FCA has published guidance to help providers determine whether their products and services fall within the regulatory perimeter. Firms already authorized for other financial services activities may also need to obtain additional permissions.

The authorization process will open on 24 June 2027, with applications divided into two periods based on projected ESG ratings revenue. Firms expecting annual revenue of £500,000 or more from ESG ratings must apply between 24 June and 29 July 2027, while smaller providers must apply between 30 July and 31 August 2027. The requirements will take effect on 29 June 2028, giving firms time to prepare their governance arrangements and compliance systems.

 

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Implementation Aims to Strengthen Investor Confidence

 

ESG ratings are used by asset managers, asset owners, lenders and benchmark administrators to assess sustainability-related characteristics and risks. Differences in rating methodologies and limited transparency have raised concerns about how investors interpret and compare assessments from different providers. The new regulations seek to address these concerns through clearer disclosure, accountability and management of potential conflicts of interest.

To support implementation, the FCA will provide guidance, webinars and access to its Pre-Application Support Service from February 2027. Providers are encouraged to assess whether they fall within the regime, review the final rules and identify necessary operational changes before applying. The framework establishes regulatory oversight of the UK ESG ratings market, although improvements in rating quality and investor confidence will depend on how effectively providers implement the requirements.

 

Source: Financial Conduct Authority (FCA)