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The UK government has introduced new legislation to regulate Environmental, Social, and Governance (ESG) ratings providers, bringing them under the supervision of the Financial Conduct Authority (FCA). The move marks a significant step toward enhancing transparency, reliability, and accountability in the ESG ratings and data market.
The regulation follows a 2021 call by the International Organization of Securities Commissions (IOSCO) for global regulators to improve oversight in the ESG ratings space. IOSCO had highlighted concerns around inconsistent methodologies, opaque data sources, and potential conflicts of interest among providers that influence investment decisions and capital allocation.
The UK’s consultation process began in 2023 under the previous administration, followed by draft legislation in 2024. The finalized law now requires all ESG ratings providers operating in the UK, both domestic and foreign, to be authorized by the FCA.
According to the FCA, ESG ratings have become “a critical influence on investment and capital allocation decisions.” The authority stated that the new law will give it the necessary powers to establish a regulatory regime focusing on four key pillars: transparency, governance, systems and controls, and conflict-of-interest management.
The FCA added that it will release proposed rules by the end of 2025, supported by industry guidance to help organizations assess whether their activities fall under the new regime and require authorization.
Regulation of ESG ratings providers is set to come into effect in June 2028.
The UK’s move signals growing regulatory attention to the integrity of ESG data and scoring methodologies, an area that has faced scrutiny for inconsistency and lack of comparability. While the law targets ratings agencies specifically, it also underscores the broader need for transparent, auditable ESG data frameworks across the sustainability landscape.
For ESG software and reporting platforms, such as SAMESG, the new regulatory environment reinforces the importance of governance, data assurance, and traceability in enabling credible and compliant sustainability reporting.
