UK Brings ESG Ratings Providers Under FCA Regulation from 2028

• 𝘛𝘩𝘦 𝘍𝘊𝘈 𝘩𝘢𝘴 𝘧𝘪𝘯𝘢𝘭𝘪𝘻𝘦𝘥 𝘳𝘶𝘭𝘦𝘴 𝘣𝘳𝘪𝘯𝘨𝘪𝘯𝘨 𝘌𝘚𝘎 𝘳𝘢𝘵𝘪𝘯𝘨𝘴 𝘱𝘳𝘰𝘷𝘪𝘥𝘦𝘳𝘴 𝘶𝘯𝘥𝘦𝘳 𝘜𝘒 𝘳𝘦𝘨𝘶𝘭𝘢𝘵𝘰𝘳𝘺 𝘴𝘶𝘱𝘦𝘳𝘷𝘪𝘴𝘪𝘰𝘯 𝘧𝘰𝘳 𝘵𝘩𝘦 𝘧𝘪𝘳𝘴𝘵 𝘵𝘪𝘮𝘦. • 𝘗𝘳𝘰𝘷𝘪𝘥𝘦𝘳𝘴 𝘰𝘱𝘦𝘳𝘢𝘵𝘪𝘯𝘨 𝘪𝘯 𝘵𝘩𝘦 𝘜𝘒 𝘸𝘪𝘭𝘭 𝘳𝘦𝘲𝘶𝘪𝘳𝘦 𝘍𝘊𝘈 𝘢𝘶𝘵𝘩𝘰𝘳𝘪𝘻𝘢𝘵𝘪𝘰𝘯 𝘧𝘳𝘰𝘮 𝘑𝘶𝘯𝘦 2028. • 𝘕𝘦𝘸 𝘳𝘦𝘲𝘶𝘪𝘳𝘦𝘮𝘦𝘯𝘵𝘴 𝘤𝘰𝘷𝘦𝘳 𝘵𝘳𝘢𝘯𝘴𝘱𝘢𝘳𝘦𝘯𝘤𝘺, 𝘨𝘰𝘷𝘦𝘳𝘯𝘢𝘯𝘤𝘦, 𝘮𝘦𝘵𝘩𝘰𝘥𝘰𝘭𝘰𝘨𝘺 𝘥𝘪𝘴𝘤𝘭𝘰𝘴𝘶𝘳𝘦𝘴, 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘮𝘢𝘯𝘢𝘨𝘦𝘮𝘦𝘯𝘵 𝘰𝘧 𝘤𝘰𝘯𝘧𝘭𝘪𝘤𝘵𝘴 𝘰𝘧 𝘪𝘯𝘵𝘦𝘳𝘦𝘴𝘵. • 𝘗𝘳𝘰𝘷𝘪𝘥𝘦𝘳𝘴 𝘮𝘶𝘴𝘵 𝘥𝘪𝘴𝘤𝘭𝘰𝘴𝘦 𝘳𝘢𝘵𝘪𝘯𝘨 𝘮𝘦𝘵𝘩𝘰𝘥𝘰𝘭𝘰𝘨𝘪𝘦𝘴, 𝘥𝘢𝘵𝘢 𝘭𝘪𝘮𝘪𝘵𝘢𝘵𝘪𝘰𝘯𝘴, 𝘢𝘯𝘥 𝘮𝘢𝘵𝘦𝘳𝘪𝘢𝘭 𝘤𝘩𝘢𝘯𝘨𝘦𝘴 𝘵𝘰 𝘶𝘴𝘦𝘳𝘴 𝘢𝘯𝘥 𝘳𝘢𝘵𝘦𝘥 𝘦𝘯𝘵𝘪𝘵𝘪𝘦𝘴. • 𝘈𝘶𝘵𝘩𝘰𝘳𝘪𝘻𝘢𝘵𝘪𝘰𝘯 𝘢𝘱𝘱𝘭𝘪𝘤𝘢𝘵𝘪𝘰𝘯𝘴 𝘸𝘪𝘭𝘭 𝘰𝘱𝘦𝘯 𝘪𝘯 𝘑𝘶𝘯𝘦 2027, 𝘢𝘩𝘦𝘢𝘥 𝘰𝘧 𝘵𝘩𝘦 𝘯𝘦𝘸 𝘳𝘦𝘨𝘪𝘮𝘦 𝘵𝘢𝘬𝘪𝘯𝘨 𝘦𝘧𝘧𝘦𝘤𝘵.

The UK’s Financial Conduct Authority (FCA) has finalized new regulatory requirements for environmental, social, and governance (ESG) ratings providers, bringing the sector under formal supervision for the first time. The framework, which takes effect in June 2028, will require firms providing ESG ratings in the UK to obtain FCA authorization. The rules apply to both UK-based providers and overseas firms offering ratings in the UK.

The framework follows legislation finalized by the UK government in October 2025 and builds on the FCA’s proposed rules published later that year. Its objective is to improve the transparency, reliability, and comparability of ESG ratings, strengthen investor confidence, and support the development of sustainable finance.

The approach draws on international standards, including recommendations from the International Organization of Securities Commissions (IOSCO) and the International Capital Market Association’s Code of Conduct for ESG ratings and data products providers.

The requirements cover transparency, governance, operational controls, conflicts of interest, and engagement with users and rated entities. Providers must publicly disclose information about their products, including rating objectives, methodologies, coverage, data sources, limitations, and engagement approaches.

They must also notify users in advance of material methodology changes and provide rated entities with advance notice of new ratings. Additional information about individual ratings must be made available to rated entities upon request.

Governance obligations include maintaining appropriate oversight, quality assurance procedures, and internal records and systems to ensure ratings use up-to-date information and consistently applied methodologies. Providers will remain responsible for outsourced functions and must ensure their personnel have the necessary competence and integrity.

They must also identify, prevent, manage, and disclose conflicts of interest, maintain effective complaints procedures, and retain records explaining how ratings and outcomes are determined.

The FCA will open authorization applications in June 2027, giving providers time to prepare before the regime begins. Laura Dawes, the FCA’s Director of Authorizations and Sustainable Finance, said the rules would raise market standards while supporting competition, innovation, and growth.

As ESG ratings become subject to stronger regulatory scrutiny, companies using them in investment, reporting, and sustainability assessments will need to understand how methodologies and data limitations affect their decisions.

Cognitud can help organizations strengthen ESG data management, assess the reliability of external sustainability information, and align internal reporting processes with evolving regulatory expectations. This can support more consistent sustainability disclosures and better-informed engagement with investors and other stakeholders.