Catenaa, Tuesday, January 20, 2026-Britain’s Financial Conduct Authority (FCA) announced plans to bring environmental, social, and governance (ESG) rating providers under regulatory supervision, aiming to increase transparency and address conflicts of interest in the industry.
Under the proposals, set to take effect in June 2028, rating firms must disclose potential conflicts, such as providing both ESG scores and advisory services to the same companies.
Providers will also be required to clarify which ESG factors they assess and publish how complaints are handled. Employees producing ratings will be barred from trading the securities of the companies they rate.
The FCA said the ESG ratings industry, currently guided by a voluntary code, has expanded rapidly but suffers from opaque methodologies and inconsistent trust.
About 5,400 UK financial firms spend a combined £622 million annually on external ESG ratings
The regulator noted that 95% of respondents to a government consultation supported regulation.
The move aligns with efforts to establish Britain as a leader in sustainable finance, addressing investor concerns that companies may overstate their ESG credentials.
Officials emphasized that ratings should be one input among broader investment analysis, not a substitute for professional judgment.
The FCA’s framework parallels similar EU initiatives and follows global principles set by the International Organization of Securities Commissions (IOSCO).
Firms affected include MSCI, Sustainalytics, S&P Global, Morningstar-owned Sustainalytics, and Refinitiv/FTSE Russell, among others.
