FCA Invites ESG Ratings Providers to Pilot New Reporting Regime

The UK Financial Conduct Authority has launched an invitation for ESG ratings providers to participate in a pilot of its proposed reporting regime, aimed at testing whether planned metrics are clear, feasible and proportionate across different business models. The pilot follows FCA regulations published in December 2024, enacted under legislation finalised in October 2024 to regulate ESG ratings providers active in the UK market.

The FCA's proposed requirements for ESG ratings providers place significant emphasis on transparency, including minimum public disclosure requirements covering product objectives, which environmental, social and governance factors are assessed, the meaning of the rating scale, how ratings compare absolute versus relative peer values, and how coverage universes are selected. The new regulations apply to UK-based providers as well as foreign firms offering ESG ratings in the UK. The FCA said the pilot aims to avoid unnecessary reporting burden over time by informing the design of the eventual reporting framework before requirements are finalised.

The regulation of ESG ratings has become a priority for financial market regulators globally, following concerns about inconsistent methodologies, lack of transparency and potential conflicts of interest. The UK has joined the EU and a number of Asian regulators in moving to bring ESG ratings providers within a formal regulatory perimeter. For large Indian companies rated by global ESG agencies and for Indian-based ESG ratings providers potentially offering services in the UK, the FCA's disclosure framework sets a benchmark for what regulators expect in terms of methodological transparency and coverage universe governance.

The FCA plans to finalise its rules for ESG ratings providers in the fourth quarter of 2026, with the new requirements scheduled to take effect from June 2028. Feedback from the current pilot will inform the design of both the reporting metrics and the broader supervisory framework. The FCA noted it may revise the proposed metrics based on pilot participants' input. The development of ESG ratings regulation in multiple major markets simultaneously is accelerating the convergence of global standards for ratings transparency, which has implications for Indian companies assessed by these providers and for domestic raters seeking international credibility.

Key figure — June 2028 — planned effective date for FCA ESG ratings provider requirements