FCA welcomes legislation to regulate ESG rating providers

The Financial Conduct Authority (FCA) has welcomed legislation to regulate ESG rating providers and has developed its own regime for ESG ratings.

The FCA’s proposals have been informed by the International Organization of Securities Commissions’ (IOSCO) recommendations which focuses on four arears: transparency, governance, systems and controls, and conflicts of interests.

The initial consultation to regulate ESG ratings providers occurred on 30 March 2023. It was announced by former Chancellor of the Exchequer Jeremy Hunt at Spring Budget 2024 that the government will regulate the provision of ESG ratings.

The FCA said that now that the legislation has been laid before the government, it intends to consult on its proposed rules before the end of the year.

The legislation is not yet a UK statutory instrument and is currently named The Financial Services and Markets Act 2000 (Regulated Activities) ESG Ratings Order 2025.