UK Empowers FCA To Regulate ESG Ratings Providers

The UK government has enacted legislation authorising the Financial Conduct Authority (FCA) to oversee ESG ratings providers. The measure seeks to improve transparency, consistency, and reliability in sustainability assessments that guide global investment decisions.

The FCA will hold a public consultation by the end of 2025 to develop detailed rules based on International Organisation of Securities Commissions (IOSCO) standards. The proposed framework will focus on transparency in methodologies, governance, system controls, and conflict management. The move aligns the UK with similar regulatory steps taken by the European Union, Japan, and Singapore. By setting minimum standards, the FCA aims to reduce data discrepancies and improve comparability across ESG ratings.

The reform is also intended to support the UK’s broader objective of strengthening its position as a sustainable finance hub and encouraging trust in responsible investment markets.