ESG Ratings Opportunity: UK Regulation Could Forge £500m in Net Benefits
3 December 2025
The UK Financial Conduct Authority (FCA) has issued proposals for consultation seeking to make environmental, social and governance (ESG) ratings “transparent, reliable and comparable” which could create up to £500 million (U$622 million) in net benefits through 2035.
The long-awaited regulation for ESG ratings providers is poised to come into effect in June 2028 provided that no major obstacles emerge. From this date, an order from the UK government would enable the FCA to make or approve rules, to give guidance and to impose requirements or give directions in relation to ESG ratings. The FCA has made clear that from 29 June 2028, any firm wishing to provide certain types of ESG ratings in the UK will require authorisation from the authority.
Key Client Takeaways:
Regulating ESG Ratings
- The FCA will require certain ESG ratings providers to be authorised by the authority from 29 June 2028, with the core goal of making ratings more transparent, reliable and comparable.
Economic and Market Impact
- The FCA estimates the regulation could deliver £500 million in net benefits by 2035, which the authority believes can help reinforce the UK’s position as a global sustainable finance hub.
Timeline and Consultation Process
- The FCA is consulting on its proposals until 31 March 2026, with final rules expected in Q4 2026, giving firms ample time to prepare before the regime takes effect in 2028.
The FCA’s proposals aim to address concerns around how ESG ratings are built and their transparency and thus focuses on four key areas. These four areas are: increased transparency to enable 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; and setting clear expectations for stakeholder engagement and complaints handling.
“We want to make ESG ratings more transparent, reliable and comparable, support better decision-making and greater confidence in the market [and] be proportionate and support growth in sustainable finance,” said the FCA.
The FCA is consulting on the proposals until 31 March 2026, while final rules are planned to be released in Q4 2024 ahead of the new regime’s proposed June 2028 date. The authority cited a previous consultation by the UK government about the future regulatory regime for ESG ratings providers published in November 2024, which found that 95% of respondents backed the introduction of regulation for ESG ratings providers. Alongside the launch of the consultation, the FCA also published a research note that contains findings from surveys which gleaned the perspectives of 111 ESG rating users drawing on a representative sample of the financial services sector and 26 ESG rating providers.
The FCA also stated that the decision is estimated to deliver around half a billion pounds in net benefits over the next decade, as well as highlighting that global spending on ESG data, including ratings, is projected to reach U$2.2 billion in 2025. It is estimated that there are as many as 150 ESG ratings providers currently operating in the UK, while comfortably more than 5000 UK companies used ESG ratings last year.
“Our proposals will give those who use ESG ratings greater trust and confidence – supporting our goal of increasing trust and transparency in sustainable finance,” said Sacha Sadan, Director of Sustainable Finance at the FCA. “This will enhance the UK’s reputation as a global sustainable finance hub – attracting investment and supporting growth and innovation.”
As far back as December 2022, Minerva Analytics reported that ESG rating providers could have been brought within the regulatory remit of the FCA by the UK government in Q1 2023. At the time there was also consultation on regulating ESG ratings and bringing them under the jurisdiction of the FCA, forming part of a package of reforms to the UK financial services regulation.
Last November, Minerva Analytics reported that both the UK and EU were set to implement regulations for ESG ratings providers aimed at improving transparency in methodology and strengthening investor confidence, something which the former is now set to deliver on. The FCA’s proposals draw on the existing voluntary industry code of conduct and International Organization of Securities Commissions recommendations to support consistency and international competitiveness. The latter had emphasised improving the reliability, comparability and interpretability of ESG ratings, as well as ensuring greater transparency in methodologies.
In October 2025, the Government published legislation to bring ESG ratings into regulation, subject to final parliamentary approval. The FCA welcomed the decision, saying that the broadly-industry supported legislation will provide the authority the necessary powers to regulate ESG ratings providers.
The FCA said that the consultation is for ESG ratings providers, ESG ratings users, including asset managers, asset owners and benchmark administrators, companies rated by providers and trade associations. The authority added that the consultation paper could also be of interest to civil society organisation, other regulators and policymakers.
The FCA stated that research it carried out had found that more than half (55%) of those who use ESG ratings are concerned about how they are built, while 48% are worried about how transparent they are. “Strengthened market trust through proportionate oversight benefits business,” the authority said. “This will reinforce the UK’s reputation as a global sustainable finance hub, supporting innovation and continued growth. It will also support the government’s commitment to sustainable finance in its industrial strategy.”
The EU’s Regulation on the transparency and integrity of ESG rating activities, meanwhile. came into force on 1 January 2025 and will begin to apply from 2 July 2026.
In August, the FCA also declared its intention to “streamline and enhance” its sustainability reporting framework and “simplify” disclosure requirements following detailed feedback from investors, as reported by Minerva Analytics. Asset managers, FCA-regulated pension providers, industry associations, trade bodies and civil society groups and other regulators and policymakers are among the parties that the authority listed as being potentially affected by the changes.
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Last Updated: 3 December 2025