John ConnorThe FSMA (Regulated Activities)(ESG Ratings) Order 2025 has introduced a new regulated activity in article 63U of the RAO of providing an ESG rating where that rating is likely to influence a decision to make an investment. A person providing ratings in these circumstances will need FCA authorisation to do so unless:
- they are already authorised and provide the rating in the course of another regulated activity or ancillary service;
- they do so in the course of carrying on an activity that is otherwise subject to FCA approval or is within the scope of a market access arrangement (that is, when providing a credit rating that falls within FCA regulation);
- they provide the rating in the course of providing a benchmark to which the UK Benchmarks Regulation does not apply;
- they provide a rating which is used to produce or is incorporated in a credit rating or scoring system;
- the rating is produced for intra-group use, private use or other specified non-commercial and non-remunerated purposes;
- the rating is developed exclusively for accreditation or certification processes;
- the person is providing the rating in order to comply with a legal or regulatory requirement; or
- the person is providing the rating as part of proxy advisor services.
The Order sets out the FCA’s powers to make rules and to implement a temporary permissions regime for transitional permissions.
The Order takes effect immediately to allow the FCA to start making rules, but the regulated activity takes effect on 29 June 2028.