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The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 (Order) has been laid before parliament.
The Order will amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to make the provision of ESG ratings a regulated activity under the Financial Services and Markets Act 2000, therefore requiring providers of ESG ratings to be authorised and supervised by the FCA. Currently, providing ESG data or ratings (or both) are unregulated activities in the UK and carrying on these activities does not trigger any requirement for authorisation.
ESG ratings are increasingly relied on by investors to assess the ESG profile of companies, funds or financial instruments. The rapid growth of this market, coupled with the lack of formal oversight, has led to concerns being raised about ESG ratings providers' transparency, conflicts of interest arrangements, internal controls and governance. In March 2023, HM Treasury therefore published a consultation on the regulation of ESG ratings providers and with its November 2024 consultation response, HMT published a draft statutory instrument (an earlier draft of the Order) to bring the provision of ESG ratings into the FCA's regulatory perimeter.
Once the Order is made, it is anticipated that the new regulated activity of providing ESG ratings will come within the regulatory perimeter on 29 June 2028. Prior to that date, the FCA will need to consult upon, and make, new rules and guidance in relation to ESG ratings providers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
