UK: FCA to consult on regulating ESG ratings providers by the end of 2025

The UK government has laid before Parliament the Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025. The Order, commencing on 29 June 2028, will bring ESG ratings providers under the regulatory remit of the Financial Conduct Authority. This will mean any ratings provider, overseas or UK-based, that is serving UK clients will need to be authorised and supervised by the FCA, unless an exemption applies. 

The government consulted on the proposal in 2024 following the rapid development of the ESG ratings market and concerns over transparency and potential conflicts of interest within ratings providers. The response to the consultation was published at the end of last year. Read our earlier blog post and client note for more detail on the earlier draft rules. 

A number of helpful exemptions have been introduced in the latest draft of the Order – including exemptions for overseas persons (see below), proxy advisory services and ratings provided solely for the purposes of meeting regulatory or legal requirements. The latest draft also very clearly exempts ratings provided in the course of conducting FCA regulated activities or (as a new helpful addition to the drafting) in the course of MiFID ancillary services (which notably would include, investment research services) or fund marketing activities. 

The Order also introduces a transitional provision for ESG ratings providers that have submitted an application for authorisation by the relevant deadline (to be determined by the FCA) but which has not been determined by the FCA in time. During the transitional period, the firm will be able to continue making available pre-existing ESG ratings in the UK (provided certain conditions are met, including a notification to the FCA and disclosures to users) but not any new ESG ratings.

The FCA has announced that it will consult on its proposed rules by the end of 2025 – which will set out more detail on the authorisation process as well as the conduct obligations that will apply to ESG ratings providers. We expect the regime will go live by 29 June 2028 (in contrast to the EU regime which goes live from 2 July 2026. Read our overview of the EU rules here.

Comparison with the EU ESG Ratings Regulation

As a result of the helpful exemptions introduced in the latest draft of the Order, the scope of firms captured as ESG ratings providers by the UK regime should end up being more targeted compared to scope captured by the EU ESG Ratings Regulation. 

As set out in the sections below, the definition of what amounts to an ESG rating is potentially broader in the UK (notably because the UK rules do not have a concept of a “rated item”). However, the UK licensing regime is only triggered if “the rating is likely to influence a decision to make an investment”, which is not the case under the EU rules. 

The UK regime also has more favourable and simpler exemptions for firms providing ratings in the course of regulated activities – notably, there is no requirement to provide disclosures related to the ESG rating (which is the case under the EU rules for the 2(2)(c) exemption that many firms are expecting to rely on). 

Scope of ESG ratings providers and exemptions 

The revised Order significantly narrows the initial scope of persons that could have potentially been captured as ESG ratings providers under the UK rules. In particular, the Order exempts:

• ESG ratings provided in the course of FCA regulated activities, MiFID ancillary services and fund marketing activities, provided the ratings are not otherwise provided as a standalone product or service – and we note that the UK exemption is generally more helpful than one of the similar exemptions in the EU rules (which is conditional upon the firm publishing certain mandatory disclosures on the ESG rating), as it does not require the publication of any ESG disclosures;

• ESG ratings from overseas ESG ratings providers, as long as they do not receive any remuneration in respect of their ESG ratings provided into the UK – although “remuneration” is very broadly defined for these purposes (as it captures not just payments, but also any other economic benefit and financial/non-financial advantage or incentive);

• ESG ratings provided in the course of providing a benchmark, even where the benchmark is exempted from the scope of the UK BMR - provided the ratings are not otherwise provided as a standalone product or service.

Scope of ESG ratings

The definition of what amounts to an ESG rating is largely the same as under the EU rules, with two key differences:

• in the EU rules, the rating must be in respect of a “rated item” – but the same concept does not exist in the UK rules, and so the UK rules could potentially be broader here;

• the UK rules provide a definition of “rating categories” (with respect to the definitional limb of “defined ranking system of rating categories”) that is broadly defined as “includes, but is not limited to, a variable or division within a system, such as a letter, number, symbol, colour or temperature, that provides a relative measure to distinguish one or more characteristics of various rated items”. 

The FCA statement published on 27 October 2025 is available here.