New FCA rules bring ESG rating providers into UK regulation for the first time
AI Analysis
The FCA has finalised PS26/22, bringing in-scope ESG rating providers within FCA authorisation and conduct regulation for the first time. The regime applies from 29 June 2028, with the authorisation gateway opening on 24 June 2027; independent market commentary indicates that providers will need to substantiate methodologies, data quality, AI use, limitations, governance and conflicts, while users should not treat regulated ratings as a substitute for investment due diligence.
Key dates
- 2026-11-03
- FCA publishes PS26/22 and final rules for the ESG ratings regime; Part 1 of Annex D comes into force.
- 2027-02-01
- FCA Pre-Application Support Service is expected to be available to prospective ESG ratings applicants.
- 2027-06-24 Deadline
- FCA authorisation gateway opens. Providers with annual revenue of £500,000 or more should apply during the first application period, from 24 June to 29 July 2027.
- 2027-07-29 Deadline
- End of the first staggered authorisation application period for providers with annual revenue of £500,000 or more.
- 2027-07-30
- Second staggered authorisation application period opens for providers with annual revenue below £500,000.
- 2027-08-31 Deadline
- End of the second staggered authorisation application period for providers with annual revenue below £500,000.
- 2028-06-29 Deadline
- The ESG ratings regime takes effect. In-scope providers must be FCA-authorised and hold the relevant permission before carrying on the regulated activity, unless an exclusion applies; unauthorised activity may breach the FSMA general prohibition and constitute a criminal offence.
Suggested considerations
- Firms should map all ESG scores, assessments, opinions and rating products against article 63U, PERG 2.3 and the FCA perimeter guidance, including whether the firm both produces and makes the rating available and whether it is likely to influence a specified investment decision.
- Potential applicants should identify the legal entity requiring authorisation or variation of permission and assess whether an exemption applies, including exemptions connected with other regulated activities, investment research, fund marketing, benchmarks and overseas persons.
- Firms should perform a gap analysis against PS26/22 covering transparency disclosures, methodology governance, data validation, quality assurance, record retention, complaints handling, rated-entity engagement and advance notification of material methodology changes.
- Providers should consider documenting controls for AI and other automated processes, data limitations, model or methodology changes, reproducibility of rating outcomes and the competence, independence and integrity of rating personnel.
- Compliance teams may wish to review conflicts arising from charging models, consulting or advisory services, commercial relationships, remuneration and personal transactions, and determine how conflicts will be prevented, managed and disclosed.
- Firms should assess governance, senior-management accountability, systems and controls, outsourcing oversight, UK presence expectations and financial-resources and wind-down arrangements relevant to the authorisation application.
- Potential applicants should consider engaging with the FCA Pre-Application Support Service from February 2027 and preparing the application materials before the relevant staggered application window.
- Users of ESG ratings should consider reviewing supplier due diligence, data procurement, investment governance and sustainability disclosure processes so that ratings are interrogated rather than treated as definitive or objectively comparable ESG measures.
What changed
Providing an ESG rating becomes a regulated activity under article 63U of the Financial Services and Markets Act 2000 (Regulated Activities) Order, subject to the statutory perimeter and exclusions. A provider is generally in scope where it produces and makes the rating available, carries on the activity by way of business, and the rating is likely to influence a decision to make a specified investment; merely distributing another provider's rating is outside this activity. From 29 June 2028, an in-scope provider must hold FCA authorisation and the relevant permission before carrying on the activity, unless an exemption applies. PS26/22 introduces requirements on public, user and rated-entity transparency; governance, systems and controls; methodology and data quality; record keeping and q
Compliance impact
This is a high-impact final rule creating a new FCA authorisation gateway and binding ongoing conduct, governance, systems, controls, transparency and conflicts obligations for a previously largely unregulated provider market. Carrying on in-scope activity without the required permission after 29 June 2028 may breach the FSMA general prohibition and constitute a criminal offence, while late or inc
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original FCA source before acting. Full disclaimer.
What the FCA said
New UK rules for environmental, social and governance (ESG) rating providers will raise standards in the market, helping investors to make better informed decisions. The new framework brings ESG rating providers into FCA regulation for the first time, covering a market that plays an important role in investment…
Extract from FCA . Read the full notice at the source for the authoritative text.