The Financial Conduct Authority (FCA) has put forward a series of proposals aimed at rebuilding confidence in ESG ratings by making them more transparent, reliable and comparable.

ESG ratings inform investment decisions, risk management, and regulatory reporting.

The new measures are designed to address concerns about inconsistent methodologies and a lack of clarity in how ratings are produced.

Research from the regulator shows that around half of those who use ESG ratings are concerned about how they are constructed (55 per cent) and their transparency (48 per cent).

The proposals focus on several areas, including greater transparency, to enable easier comparison for the benefit of both users and those being assessed.

Improving governance, systems and controls to ensure clear decision-making, strong oversight and quality assurance also form part of the proposals.

FCA data shows that global spending on ESG data, including assessments, is expected to reach $2.2 billion in 2025, with the UK watchdog estimating that the new initiative will generate around £500 million in net benefits over the next decade.

The final rules are expected in the fourth quarter of 2026, with the new regime coming into force from June 2028.

The authority stated that introducing clear and proportionate rules on transparency and governance will help strengthen market confidence in ESG ratings and address related concerns.

The improvements aim to strengthen the UK's reputation as a sustainable global financial centre, while also underpinning the government's commitment to sustainable finance in its industrial strategy, the FCA added.

The new proposals follow the government's decision to include ESG ratings within the regulator’s remit, which was supported by 95 per cent of respondents to its consultation.

Sacha Sadan, director of sustainable finance at the FCA, said the proposals aim to provide greater confidence and certainty to users of ESG ratings, supporting their goal of increasing trust and transparency in sustainable finance.

“This will enhance the UK’s reputation as a global sustainable finance hub – attracting investment and supporting growth and innovation,” Sadan added.

The FCA is welcoming comments on the proposals, with the consultation open until 31 March 2026.

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