Jul 14

2026

Beyond the paperwork: how to prepare for the FCA’s new ESG ratings oversight

The FCA is bringing ESG ratings providers into regulation for the first time. Final rules are expected in Q4 2026, and the new regime is due to take effect on 29 June 2028.

For most businesses, the key point is scope. The rules regulate firms that produce certain ESG ratings, not ordinary companies that are being rated. If you run a typical SME, you will not need FCA authorisation simply because a lender, investor or customer scores your ESG performance.

What changes is indirect but important. As ESG ratings become more transparent, comparable and regulated, the data behind your score is likely to face more scrutiny. The useful preparation is not another form. It is making sure your environmental, social and governance data is accurate, evidenced and easy to explain. Our guide to ESG reporting for SMEs is a sensible starting point.

What the FCA is actually doing

The FCA published CP25/34 on 1 December 2025 after the government brought ESG ratings within the UK regulatory perimeter. The consultation closed on 31 March 2026.

The FCA’s proposals aim to make ESG ratings more transparent, reliable and comparable. The regulator’s research found that 55% of ESG ratings users were worried about how ratings are built, while 48% were concerned about transparency. The proposed rules focus on methodology disclosure, governance, systems and controls, conflicts of interest, stakeholder engagement and complaints handling.

Who is in scope, and who is not

A firm is likely to be caught if it provides ESG ratings as a regulated activity and those ratings are used, or are likely to be used, to inform investment or financial decisions in the UK.

The regime is aimed at ratings providers. It is not aimed at companies that are simply rated, customers that request supplier ESG data, or SMEs preparing sustainability information for lenders. Some ratings produced inside existing regulated services may be outside the main authorisation requirement, depending on how they are used and distributed.

Overseas providers should also pay attention. If their ESG ratings are used in the UK, the UK regime may still matter. Providers selling into the EU have a separate regime to consider, with the EU ESG Ratings Regulation applying from 2 July 2026 under ESMA supervision.

Why it still matters if you are only being rated

Investors, lenders and large customers increasingly use ESG ratings to support lending, procurement and investment decisions. Once those ratings are produced under more transparent rules, weak or unevidenced data will be harder to explain away.

A figure that cannot be traced to bills, meter readings, payroll data, supplier records or a documented calculation method is thin evidence. Thin evidence is exactly what tighter oversight is designed to expose. The same discipline used for greenwashing and disputed figures now applies to sustainability numbers.

This also links to wider corporate reporting. UK SRS S1 and UK SRS S2 were published by the government on 25 February 2026 for voluntary use, setting out a framework for sustainability-related and climate-related disclosures. Ratings oversight does not replace corporate reporting, but both point in the same direction: clearer, better-evidenced data. Our note on preparing for UK Sustainability Reporting Standards explains the practical reporting discipline.

What to actually do now

Start with the evidence you already have. Collect a full year of electricity, gas, fuel and mileage records. Calculate Scope 1 and Scope 2 emissions using a recognised method and keep a clear note of assumptions. Document governance policies, risk processes, staff data and supplier information where relevant.

Do this once properly and it can support several requests: lenders, tenders, investor questionnaires, UK reporting and EU-linked requirements. Our guide to collecting ESG data before you are asked sets out the groundwork, while our update on the EU CSRD position for UK businesses covers cross-border reporting pressure.

The aim is not to track everything. Track the few things that matter properly. The same principle applies to financial KPIs worth watching monthly. Where you are developing genuinely new or improved sustainability processes, products or technologies, R&D tax relief may also be worth reviewing, subject to the normal eligibility rules.

If you are a ratings provider

If ESG ratings are your business, the timetable is tighter. You should start with a gap analysis against the proposed rules on transparency, governance, conflicts, complaints and methodology disclosure. If you serve both UK and EU users, build documentation that can support both regimes rather than treating them separately. Our cross-border accounting and tax team can help with the dual-jurisdiction detail.

Frequently asked questions

Does this regime mean my business has to report ESG data?

No. It regulates ESG ratings providers, not ordinary companies. Data requests may still reach you through lenders, customers and procurement teams.

When does the FCA regime take effect?

Final rules are expected in Q4 2026, and the regime is due to take effect on 29 June 2028.

Does it replace CSRD or UK Sustainability Reporting Standards?

No. ESG ratings oversight and corporate sustainability reporting are separate. UK SRS S1 and S2 cover disclosures by companies, while the FCA regime covers how ratings are produced.

Get ahead while it is still calm

The regime is still 2 years away from biting, which makes now the calm time to get your ESG data in order. If a poor score is already affecting finance terms, early recovery and restructuring advice can help. Our SME business solutions team can also build practical reporting discipline into your monthly numbers. Speak to SCC Chartered Accountants about getting ahead of it.