New FCA rules bring ESG rating providers into UK regulation for the first time

The rules aim to enhance transparency, reliability, and comparability of ESG ratings, which are increasingly relied upon by investors. For compliance teams, this means assessing whether your firm provides ESG ratings or assessments and, if so, preparing for authorization and ongoing compliance obligations. Firms that use ESG ratings should review their reliance on these products and consider how the new standards may affect investment decisions and risk management.

The FCA has published guidance to help firms determine their scope. While no specific implementation dates were announced, in-scope providers should proactively engage with the FCA and adapt their operations. The regime is expected to raise market standards, fostering greater trust and supporting competition and innovation.

Compliance leaders should monitor further FCA communications, update policies and procedures, and consider training for staff involved in ESG data and ratings. Overall, this development signals a significant shift in the ESG data landscape, with implications for investment management, banking, and other sectors that integrate ESG factors into their activities.