The UK new ESG mandate has officially arrived. On 15 December 2025, the UK government signed a landmark piece of legislation- the Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025. For the first time ever, the UK government is bringing companies that provide ESG (Environmental, Social, and Governance) ratings under formal financial regulation. The Financial Conduct Authority (FCA) now has the legal power to oversee this sector, and the rules will come into full force by 29 June 2028.
This regulation will affect ESG ratings providers, investors who rely on ESG data, and companies that receive ESG ratings. Today, we’ll break it all down, including what the rules are, who needs to comply, and what steps you should take right now. So, let’s get started!
ESG investing has grown enormously. The value of global ESG investment market was around $39 trillion in 2025, and it will exceed $180 trillion by 2034. Alongside this growth, the ESG ratings market has also expanded rapidly. Global spending on ESG data and ratings may reach $2.2 billion in 2025.
But there has been a serious problem. ESG ratings companies have been operating without any formal regulatory oversight. Research by the FCA found that around 55% of ESG ratings users had concerns about how those ratings are built, and 48% were worried about a lack of transparency. There have also been concerns about conflicts of interest — for example, situations where a ratings provider also earns consulting fees from the companies it rates.
Put simply, investors were making major financial decisions based on ratings that nobody was officially monitoring. The UK new ESG mandate is designed to fix this. It will make ESG ratings more reliable, more transparent, and held to the same professional standards as other financial information.
The legislation formally amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to add “providing an ESG rating” as a new regulated activity. This means that firms carrying on this activity in the UK will require FCA authorisation, just as investment advisors, fund managers, and banks do today.
The FCA is currently consulting on the detailed rules through its Consultation Paper 25/34. The consultation period closes on 31 March 2026, after which the FCA will develop and publish final rules.
Here is the full timeline you need to have on your radar:
| Date | What Happens |
| 15 December 2025 | The ESG Ratings Order is signed into law. |
| 31 March 2026 | FCA consultation period closes. |
| Q4 2026 | FCA publishes its final rules. |
| January 2027 | Six-month pre-gateway support period begins to help companies prepare. |
| June 2027 | FCA opens the authorization application window. |
| 29 June 2028 | The new regime officially comes into force. Companies must be authorised. |
| 29 June 2029 | Transitional period ends. All providers must be fully authorised. |
One of the most important things to understand is that the definition of an ESG rating in this legislation is deliberately broad. A lot of companies may be surprised to find that their existing outputs fall within scope.
Under the Order, an ESG rating is any assessment of one or more ESG factors that:
The legislation specifically covers two types of ratings:
Crucially, the regulation does not care what you call your output. Whether your rating system uses letter grades (A, B, C), numbers (1-100), colours (red, amber, green), temperatures, or symbols — it could all fall within scope. The key question is simply: could this assessment influence an investment decision?
It is also worth noting that the rating can be solicited or unsolicited. It does not have to be produced at the request of the company being rated. If the output meets the definition, it is regulated.
The authorisation requirement applies to:
There is a limited overseas person exclusion: a non-UK firm that receives no payment whatsoever for its ESG ratings from any party can avoid the UK-regulated activity. But this exclusion is very narrow and unlikely to apply to commercial providers.
Not every organisation that produces ESG-related assessments will need to go through the authorisation process. The Order contains several important exclusions:
Even if you are exempt from the new ESG ratings regime, please note that already-regulated FCA firms still remain subject to other requirements. These include the FCA’s anti-greenwashing rule, ESG naming and marketing rules, and the sustainable finance labelling regime.
The FCA’s proposed rules are aligned with international standards developed by the International Organisation of Securities Commissions (IOSCO). The regulatory framework focuses on four core pillars:
Authorised ESG ratings providers will need to clearly explain how they calculate their ratings, what data sources they use, what their objectives are, and how their ranking systems work. All of this information must be freely accessible to the relevant parties.
Providers must demonstrate strong quality control. This means having proper data validation processes, regular reviews of their methodologies, and clear internal accountability for who produces ratings and how.
This is a central concern for the FCA. Providers must identify potential conflicts of interest — for example, if they provide consulting services to companies they also rate. They must then have systems in place to either prevent those conflicts or manage and disclose them clearly.
Companies being rated are given rights under the new regime. They can challenge factual errors in their ratings. Other users of ESG ratings can also provide feedback to rating providers. There must be fair and transparent complaint procedures in place.
The UK is not acting alone here. The European Union has introduced its own ESG Ratings Regulation (EU 2024/3005), which took effect on 2 January 2025 and will begin applying from 2 July 2026. Both the UK and EU frameworks are built on the same IOSCO recommendations, which means they are substantially aligned.
If you operate in both the UK and EU, you will need authorisation from both the FCA and the European Securities and Markets Authority (ESMA). This creates additional administrative burden, but because the two frameworks are closely aligned, companies can often use the same documentation for both applications.
One advantage for UK firms is timing. The UK’s implementation date of June 2028 is two full years after the EU’s July 2026 date, giving UK-based companies more time to prepare.
If you are an investor who uses ESG ratings to guide your decisions, the UK’s new ESG mandate is broadly good news. Here is what you can expect to see improve over time:
However, there may be some short-term disruption. Smaller ESG ratings providers that cannot afford the cost of authorisation and ongoing compliance may exit the market. This could temporarily reduce the range of ratings available to you.
While the regulation is a positive step, there are real challenges ahead:
The new ESG ratings regime does not exist in isolation. It is part of a broader UK strategy to make sustainable finance more credible, transparent, and globally competitive. Other developments in this space include:
Together, these measures support the UK’s goal of reaching net-zero emissions by 2050 and building the country’s reputation as a global hub for sustainable finance.
If you think this regulation might apply to you, here are the practical steps to take:
Ask yourself: do we produce assessments of environmental, social, or governance factors? Do those assessments use a methodology and ranking system? Could they influence investment decisions? If yes to all three, you may need authorisation.
Review the list of exclusions carefully. Many firms that produce ESG-related content will actually fall outside the regime due to one of the targeted exemptions. Do not assume you are in scope until you have checked.
The FCA’s consultation period closes on 31 March 2026. Read the consultation carefully and consider responding, especially if you have concerns about how the proposed rules will affect your business. Watch for the final rules in Q4 2026.
If you will need authorization, do not wait until 2027. Start now. Review your methodologies and document them clearly. Build your governance framework. Identify and manage potential conflicts of interest. Consider attending FCA webinars and roundtables in early 2026.
If you serve both UK and EU clients, align your documentation from the start. Because the two regimes are based on the same IOSCO principles, preparation for one will largely cover the other.
The UK’s new ESG mandate represents a genuine turning point for the sustainable finance industry. For years, the ESG ratings sector operated without any formal regulatory structure, even as it grew to influence trillions of pounds of investment decisions. That changes now.
For ESG ratings providers, this means more work in the short term, but also greater credibility and market trust in the long run. Whereas, for investors, it means better quality information. And, for companies, it means a fairer and more transparent process.
The FCA is implementing a measured, phased approach by giving firms a long preparation window, offering pre-gateway support, and introducing transitional provisions to help them become fully authorised. The industry generally supports this direction of travel. In 2023, the Treasury consulted on bringing ESG ratings under FCA regulation and found strong backing from the industry itself.
The next step is clear: assess whether you are in scope, check your exemptions, and start preparing. The rules may not come into force until June 2028, but the groundwork needs to be laid today.
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