The FCA has published proposals for ESG ratings in an attempt o make them more transparent and comparable.

The proposals follow the decision by the Government to bring ESG ratings within the FCA’s remit and help build the market’s trust in ESG ratings and address ongoing concerns.

The FCA’s research shows around half of those who use ESG ratings are worried about how they are built (55 per cent) and how transparent they are (48 per cent). The proposals aim to address this and focus on 4 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.
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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.”

The 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 FCA is looking for feedback on the proposals and the consultation is open until 31 March 2026 with final rules are expected in Q4 2026, with the new regime coming into effect from June 2028. The FCA will provide support for those firms wishing to become authorised as an ESG rating provider.

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