Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 published

The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 has been published, accompanied by an explanatory memorandum. This follows the draft version of the Order which was laid before the UK Parliament in October. The Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to bring the provision of an environmental, social or governance (ESG) rating into the remit of the UK Financial Conduct Authority (FCA) when that rating is likely to influence a decision to make a specified investment. This means that providers of an ESG rating will need to be authorised by the FCA. The FCA published a consultation on 1 December setting out its proposed rules for the ESG ratings regime. The Order inserts a new article 63U into the RAO setting out the new regulated activity. It also specifies exclusions, including exclusions for regulated products and services, intra-group ratings, private use, and ancillary non-commercial provision. In addition, the Order tailors the overseas persons exclusion in article 72 of the RAO to reflect the new regulated activity.

Transitional provisions allow firms to apply for FCA authorisation ahead of the main commencement date, with a one-year transitional regime for those with pending applications. These provisions will cease to have effect on 29 June 2029, one year after the main commencement date for the Order. Exemptions apply for credit rating agencies and certain entities already authorised under the RAO, where ESG ratings are ancillary to their primary regulated activities. The Order entered into force on 16 December, the day after it was made, for limited purposes, including enabling the FCA to make rules and accept applications for authorisation. The full regulatory regime will apply from 29 June 2028.

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