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The FCA has published new proposals to ensure that environmental, social and governance (ESG) ratings are transparent, reliable and comparable.
The initiative is expected to generate approximately £500 million in net benefits over the next decade.
ESG ratings play a crucial role in investment decision-making, risk management and regulatory reporting. Global spending on ESG data – including ratings – is projected to reach $2.2 billion in 2025.
These proposals follow the UK government’s decision to bring ESG ratings under the FCA’s regulatory scope, a move supported by 95% of consultation respondents. By introducing clear and proportionate rules for transparency and governance, the FCA aims to strengthen market trust in ESG ratings and address existing concerns.
FCA research shows that nearly half of ESG rating users are concerned about how these ratings are constructed (55%) and how transparent they are (48%). The proposals seek to address these issues and focus on four key areas:
- Greater transparency – enabling easier comparison for both users of ratings and the companies being rated.
- Enhanced governance, systems and controls – ensuring clear decision-making, strong oversight and robust quality assurance.
- Identification and management of conflicts of interest.
- Clear expectations for stakeholder engagement and complaints handling.
The proposals also outline how existing FCA rules should apply to firms entering the FCA’s regulatory perimeter. The rules are designed to be proportionate to the size and risk profile of each business.
Proportionate oversight that strengthens market trust benefits businesses and supports the UK’s reputation as a global hub for sustainable finance. It also encourages innovation, fuels continued growth, and supports the government’s broader commitment to sustainable finance within its industrial strategy.
Sacha Sadan, Director of Sustainable Finance at the FCA, stated:
“Our proposals will give ESG rating users greater trust and confidence – supporting our goal of increasing transparency and integrity in sustainable finance.
This will reinforce the UK’s position as a global sustainable finance hub – attracting investment and fostering growth and innovation.”
The proposals draw upon the existing voluntary industry code of conduct and IOSCO (International Organization of Securities Commissions) recommendations to promote consistency and global competitiveness.
The FCA is inviting feedback on its proposals, with consultation open until 31 March 2026.
Final rules are expected to be published in Q4 2026, with the new regime taking effect from June 2028. The FCA will provide guidance and support for firms seeking authorisation as ESG rating providers.