FCA Sets Authorisation Rules for UK ESG Rating Providers

The Financial Conduct Authority (FCA) has introduced a regulatory regime for environmental, social and governance (ESG) rating providers, bringing the sector into UK financial regulation for the first time. Providers operating in the UK market will need to apply for FCA authorisation from 24 June 2027 and, unless exempt, hold the relevant permission when the framework takes effect on 29 June 2028. The final rules cover how ESG ratings are produced, governed and communicated. They set requirements for transparency, governance, systems and controls, conflicts of interest, and engagement with users of ratings and the entities being assessed. The FCA says the requirements are designed to be proportionate to firms’ size and activities and draw on international and existing standards, including recommendations from the International Organization of Securities Commissions. The regime does not prescribe a particular view of sustainability or a specific rating methodology. The FCA has published Policy Statement PS26/22, “ESG ratings: final regime,” alongside guidance to help organisations determine whether their activities fall within scope. Firms that may be covered are encouraged to review the rules, assess whether they need authorisation and begin preparing. The regulator says it will offer webinars and access to its Pre-Application Support Service; application periods will be staggered, and firms are encouraged to apply as early as possible within their window. ESG ratings assess companies, other entities, assets or financial products against environmental, social and governance criteria, and are used by asset managers, lenders and benchmark administrators, among others, to inform decisions. The FCA says the new framework is intended to improve the transparency, reliability and comparability of ratings. It follows legislation bringing ESG ratings within the regulator’s remit in October 2025 and a consultation that ran from 1 December 2025 to 31 March 2026.