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On 27 October, the UK government took a decisive step toward enhancing integrity and trust in the sustainable finance market by introducing new legislation in Parliament to regulate ESG rating providers.
Bringing ESG ratings under supervision is a recognition of the crucial role they play in the market to inform business decision-making and capital allocation, whether in financial markets or procurement. This move formally brings UK-market ESG rating providers under the direct supervision of the Financial Conduct Authority (FCA), signifying the UK’s commitment to aligning with international recommendations, particularly those from the International Organization of Securities Commissions. (IOSCO).
The Road Ahead for UK ESG Regulation
Now that it has been laid before Parliament, the legislation is expected to be formally adopted in the coming weeks. The FCA has been tasked with designing the detailed rules for supervision, and the authority now intends to consult on the proposed regulation before the end of the year.
While we await the consultation documents, we anticipate that the requirements will closely mirror the mandate emerging in the EU, which will require clear disclosure of how ratings are calculated and establish robust governance to ensure independence and impartiality — in line with IOSCO recommendations.
The supervision regime will officially commence in June 2028. This lead time provides the FCA and the market with ample opportunity to establish a practical and proportionate regulatory framework.
Defining the Regulatory Scope and EcoVadis’s Preparedness
The cornerstone of the new UK regime is its focus: regulating ESG ratings that are “likely to influence investment decisions”.
Based on this specific definition, our current assessment is that the majority of our activities — which are primarily used for procurement, risk management, and operational due diligence — do not fall within the scope of this investment-decision-focused legislation.
However, the Financial Conduct Authority has been tasked with designing the detailed rules and will issue perimeter guidance to support companies in clearly understanding which ratings are in scope.
Regardless of where the FCA ultimately draws the line, our mission remains the same: to provide the most reliable, actionable, and credible sustainability intelligence possible. We are actively monitoring the development of the FCA’s rulebook and will engage in the process to ensure full compliance with the new regime when it comes into effect in June 2028.
Raising the Bar for Transparency
The regulation of ESG ratings is a necessary and welcome evolution that will bring greater transparency, reliability, and comparability to the sustainability data market. This is a critical step to ensure that sustainable finance decisions are robust and that businesses can confidently manage the integrity of their environmental and social commitments.
The journey to the commencement date in June 2028 will be defined by the clarity provided in the coming months by the FCA’s proposed rules. We are dedicated to providing our customers and the broader market with timely updates as the FCA further defines the scope and requirements for ESG ratings providers in the UK.