In Short

• The new ESG rating regime in the UK is set to take effect in June 2028.
• FCA proposes rules that are proportionate to business size and risk.

The UK’s financial regulatory body, the Financial Conduct Authority (FCA), has published proposals to make ESG ratings more transparent, reliable, and comparable.

The object of the new ESG rating rules is to build trust in the market as well as give teeth to UK sustainable finance. And, it is expected to deliver £500m in net benefits over the next decade.

ESG ratings play a larger role in risk management, regulatory reporting, and investment decisions. According to reports, global spending on ESG data, ratings included, is estimated to touch $2.2bn in 2025.

Read More: FCA Plans to Relax Climate Reporting Rules for Financial Firms

On the back of the government’s decision to bring ESG ratings under the FCA’s ambit, 95% of consultation respondents backed having clearer rules.

The latest proposals focus on four important areas: transparency and comparability; governance, systems, and controls; conflict of interest management; and stakeholder engagement.

The proposed rules will also apply existing FCA regulations to businesses entering the ESG market.

The proposals are also in line with the voluntary industry code of conduct and IOSCO recommendations to ensure consistency and international competitiveness.

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The feedback period is until 31 March 2026, followed by final rules expected in Q4 2026, and eventually, the new ESG rating regime kicking in in June 2028.

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