The UK‘s Financial Conduct Authority (FCA) has published proposals aimed at ensuring that environmental, social and governance (ESG) ratings are ‘transparent, reliable and comparable’.
According to the FCA, these proposals could unlock around £500 million in net benefits over the next decade, with ESG ratings used in investment decisions, risk evaluation and regulatory reporting.
Global spending on ESG data, including ratings, is projected to reach $2.2 billion this year, and the move by the FCA follows the UK government’s decision to introduce ‘clear, proportionate rules for transparency and governance’, which in turn will build market trust in ESG ratings.
Recent research undertaken by the FCA indicates that around half of those (55%) that use ESG ratings are concerned about how they are developed, while a similar percentage (48%) question how transparent they are.
The proposals seek to address this across four areas: increased transparency, increased governance, conflict management and stakeholder engagement processes.
‘Greater trust and confidence’
“Our proposals will give those who use ESG ratings greater trust and confidence – supporting our goal of increasing trust and transparency in sustainable finance,” commented Sacha Sadan, director of sustainable finance at the FCA.
“This will enhance the UK’s reputation as a global sustainable finance hub – attracting investment and supporting growth and innovation.”
The FCA’s proposals draw on an existing voluntary industry code of conduct, along with International Organization of Securities Commissions (IOSCO) recommendations to support consistency and international competitiveness.
Consultation process
A consultation process on the proposals is now open, and will run until 31 March 2026. The final proposals are planned for publication in the fourth quarter of 2026, with implementation scheduled for June 2028.
‘Strengthened market trust through proportionate oversight benefits business, the FCA noted. ‘This will reinforce the UK’s reputation as a global sustainable finance hub, supporting innovation and continued growth. It will also support the government’s commitment to sustainable finance in its industrial strategy.’ Read more here.
