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Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025

Synopsis

This order will amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to make providing Environmental, Social and Governance (ESG) ratings a regulated activity where they are likely to influence investment decisions.

Firms providing ESG ratings within this scope will be required to be authorised and supervised by the Financial Conduct Authority (FCA).

Summary

The draft Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 are expected to amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The date for these amendments to come into force has not yet been confirmed, although the order is due to later come fully into force on 29 June 2028.

This legislation will apply across the UK.

What will Change?

The provision of Environmental, Social, or Governance (ESG) ratings will become a regulated activity under the Financial Services and Markets Act 2000, where those ratings are likely to influence decisions to make investments.

As a result, any firm providing ESG ratings within scope will be required to be authorised and supervised by the Financial Conduct Authority (FCA).

ESG Ratings within Scope

An ESG rating is an assessment of one or more environmental, social or governance factors prepared using:

an established methodology, meaning techniques and procedures that are systematically applied to identify, collect, analyse and interpret data to produce the rating; and
a defined ranking system, such as colour categories, numerical scores, letters, symbols or other structured rating classes.

A firm is regarded as providing an ESG rating within the scope of the order where it produces the rating and makes it available to others. Entities that only distribute ratings produced by third parties are excluded from the scope.

An ESG rating will fall within the regulated activity only where it is likely to influence a decision to make a specified investment. Where the provider could not reasonably expect the rating to influence such a decision, the rating is considered out of scope.

The scope also extends to how and where ratings are provided:

Within scope: ESG ratings produced by a UK-based provider and supplied, whether on a paid or free basis, to any client in the UK or overseas.
ESG ratings supplied to a UK customer by an overseas provider are also within scope, unless the rating is provided free of charge, in which case it is excluded.

Further Exclusions

The following situations will be excluded and will not be treated as the provision of a regulated ESG rating:

Ratings provided as part of another financial service or activity that is already regulated by the FCA.
Ratings that also qualify as benchmarks under the UK Benchmarks Regulation.
Ratings that form part of, or are incorporated into, a credit rating under the Credit Rating Agencies Regulation.
Ratings produced occasionally or without payment by charities, academics or journalists.
Accreditation or certification activities where ratings support corporate strategy, purchasing decisions or supply chain management, rather than investment decisions.
Ratings produced solely to meet a legal or regulatory requirement placed on the provider, such as regulatory reporting.
Ratings provided as part of proxy advisory services, where the purpose is to advise shareholders on voting or governance matters in line with existing UK regulations.
Intra-group ESG ratings, where one company within a group provides a rating to another, and the provider does not reasonably expect the rating to be shared outside the group.
Ratings provided by public authorities, central banks and international organisations.

Rules and Guidance

The FCA and Ombudsman Scheme Operator will be able to establish and amend rules on ESG ratings.

The FCA will also be able to provide guidance on ESG ratings.

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