The FCA has today launched a consultation on its proposed regulatory rules for ESG ratings providers, which it said are designed to ensure that ESG ratings are transparent, reliable and comparable.

It said it is seeking feedback on the proposals by next spring.

The government introduced legislation to allow ESG ratings providers to come under FCA regulation in October.

Environmental, social and governance (ESG) ratings are evaluations of a company, product or fund’s performance across environmental, social and governance factors. 

The FCA said its 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 regulator said 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.

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%). It said its proposals aim to address this and focus on four 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. 

 



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.”

Carol Thomas, head of sustainability and responsible investment at the Investment Association, said: “ESG data and ratings providers play an essential role in providing information and services that impact on investment decisions.

"As such, we welcome the consultation and hope to see a proportionate approach to regulating ESG ratings providers, one which does not impede the growth and evolution of sustainable and responsible investment."

The FCA also allocated £3m for the cost of its work in 2025/26 developing the regulatory regime for ESG ratings providers.

The FCA said it welcomes feedback on the proposals – the consultation is open until 31 March 2026.