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

6 ESG ratings

After article 63T (administration of a benchmark by the FCA), insert— CHAPTER 15F ESG RATINGS The activity ESG ratings 63U (1) Unless paragraph (2) applies, providing an ESG rating is a specified kind of activity, where that rating is likely to influence a decision to make an investment specified in Part 3. (2) This paragraph applies where the person providing an ESG rating could not reasonably have expected it to influence a decision to make an investment specified in Part 3. (3) For the purposes of paragraph (1), it is immaterial whether the ESG rating is solicited or unsolicited. (4) In paragraphs (1) and (2), “make”, in relation to an investment specified in Part 3, has the meaning given in article 63Z7. Exclusions Regulated products and services 63V (1) A person does not carry on an activity of the kind specified by article 63U by providing an ESG rating in the course of carrying on— (a) another activity which is carried on in accordance with a Part 4A permission and is— (i) a regulated activity, or (ii) an ancillary service listed in Part 3A of Schedule 2; (b) an activity for which they are subject to approval by the FCA under a provision of assimilated law or legislation restated by virtue of section 4 (power to restate and modify saved legislation) of the Financial Services and Markets Act 2023; (c) an activity that is within the scope of a market access arrangement; (d) an activity in relation to— (i) a scheme recognised for the purposes of Part 17 of the Act, or (ii) an AIF which is marketed under regulation 58 (marketing of AIFs managed by small third country AIFMs) or 59 (marketing of AIFs managed by other third country AIFMs) of the Alternative Investment Fund Managers Regulations 2013. (2) For the purposes of paragraph (1), an ESG rating is not provided in the course of carrying on an activity under any of sub-paragraphs (a) to (d) where it is provided as a standalone product or service. (3) In this article— “approval by the FCA” includes authorisation, registration, and any other functionally equivalent process of approval however expressed; “market access arrangement” means— the provision of a credit rating by a credit rating agency which is certified by the FCA under Article 5 (equivalence and certification based on equivalence) of the UK CRAR; an arrangement under which a person provides a benchmark to supervised entities for the purposes of the UK Benchmarks Regulation, which is— in reliance on— Article 30 (equivalence), Article 32 (recognition of an administrator located in a third country), or Article 33 (endorsement of benchmarks provided in a third country), and in respect of which the person is included on the FCA’s register of administrators and benchmarks under Article 36(1) (b), (c) or (d) (register of administrators and benchmarks), of that Regulation; an arrangement under which a person provides a benchmark to supervised entities under Article 51(5) (transitional provisions) of the UK Benchmarks Regulation; an activity which is carried on— by an overseas person and which is subject to an exclusion in article 72 (overseas persons), other than an activity of the kind specified by article 63U; by a registered Swiss supplier in the circumstances described in article 72ZA(1) (Swiss mutual recognition firms). Unregulated benchmarks 63W (1) A person does not carry on the activity of the kind specified by article 63U where they provide an ESG rating in the course of providing a benchmark to which the UK Benchmarks Regulation does not apply as a result of Article 2(2)(a) to (g) (scope: exclusions) of that Regulation. (2) For the purposes of paragraph (1), an ESG rating is not provided in the course of providing a benchmark of the kind mentioned in paragraph (1) where the ESG rating is provided as a standalone product or service. Unregulated credit ratings 63X (1) A person does not carry on an activity of the kind specified by article 63U by providing an ESG rating which is used to produce, or is incorporated in— (a) a credit rating, (b) a credit score, or (c) a credit scoring system or similar assessment related to obligations arising from a consumer, commercial or industrial relationship, and which is excluded from the UK CRAR by Article 2(2) of that Regulation. (2) For the purposes of paragraph (1)— (a) “credit rating” and “credit score” have the meaning given in Article 3(1) of the UK CRAR; (b) an ESG rating is not provided to produce, or as incorporated in, any of the matters described at paragraph (1)(a) to (c) where the ESG rating is provided as a standalone product or service. Intra-group ratings 63Y A person (“P”) does not carry on an activity of the kind specified by article 63U by providing an ESG rating where P is a member of the same group as the person to whom the ESG rating is provided (“Q”), and— (a) P does not reasonably expect the ESG rating to be made available to another person outside that group, or (b) P reasonably expects that Q will only make the ESG rating available outside of that group as part of carrying on an activity mentioned in sub-paragraphs (a) to (d) of article 63V(1). Private use 63Z A person (“P”) does not carry on an activity of the kind specified by article 63U by providing an ESG rating which— (a) is provided pursuant to a contract with another person (“Q”), (b) relates solely to Q, and (c) P does not reasonably expect to be made available to another person outside Q’s group. Ancillary non-commercial provision 63Z1. (1) A person does not carry on an activity of the kind specified by article 63U by providing an ESG rating where the following conditions are met— (a) the ESG rating is provided in the course of the person’s activities as a journalist, an academic, or a charity, and (b) either of the following applies— (i) the person does not receive relevant remuneration from a person who uses or is the subject of the ESG rating in connection with the provision of the ESG rating, or (ii) the ESG rating is provided on an occasional or one-off basis. (2) The condition in paragraph (1)(b)(ii) is not met where the ESG rating is regularly updated or maintained in a way that would enable it to be relied upon on an ongoing basis. (3) In this article, “relevant remuneration” means any commission, fee, charge or other payment, including an economic benefit of any kind or any other financial advantage or incentive offered. Public authorities, central banks and international organisations 63Z2. (1) The provision of an ESG rating by a public authority, a central bank or an international organisation is excluded from article 63U. (2) In this article— “central bank” means the Bank of England, the European Central Bank and the central banks of any country or territory outside the United Kingdom; “international organisation” means any body the members of which comprise— states including the United Kingdom, or bodies whose members comprise states including the United Kingdom, where “state” includes the public authority of a state; “public authority” means a person or body exercising functions of a public nature. Accreditation or certification 63Z3. A person does not carry on an activity of the kind specified by article 63U by providing an ESG rating where the ESG rating is developed exclusively for accreditation or certification processes, and the purpose of that accreditation or certification is not to influence a decision to make an investment specified in Part 3. Regulatory or legal requirement 63Z4. (1) A person (“P”) does not carry on an activity of the kind specified by article 63U where an ESG rating is provided solely for the purpose of complying with any regulatory or legal requirement to which P is subject. (2) In this article, “regulatory or other legal requirement” means a requirement imposed by an Act, or any other enactment, including rules made by a regulator under such enactment. (3) In paragraph (2), “enactment” has the meaning given in section 3T of the Act. Proxy advice 63Z5. A person does not carry on an activity of the kind specified by article 63U by providing an ESG rating as part of the provision of proxy advisor services within the meaning given in regulation 2 of the Proxy Advisors (Shareholders' Rights) Regulations 2019. Other exclusion 63Z6. Article 63U is also subject to the exclusion in article 72 (overseas persons). Supplemental Interpretation 63Z7. In this Chapter— “benchmark” has the meaning given in Article 3(1)(3) (definitions) of the UK Benchmarks Regulation; “charity” means— in England and Wales, a charity registered under section 30(1) of the Charities Act 2011; in Scotland, a charity registered under section 3 of the Charities and Trustee Investment (Scotland) Act 2005; in Northern Ireland, a charity registered under section 16(2) of the Charities Act (Northern Ireland) 2008; “ESG factor” means an environmental, social or governance factor; “ESG rating” means an assessment regarding one or more ESG factors, which— is produced in the form of an opinion, a score or a combination of both, where— “score” means a measure derived from data and a pre-established statistical or algorithmic system or model, without additional substantial analytical input from an analyst, and “opinion” means an assessment involving substantial analytical input from an analyst, and is prepared using an established methodology and a defined ranking system of rating categories, whether or not it is characterised as an ESG rating; “located in the United Kingdom” means— in relation to a legal person— the person’s registered office is in the United Kingdom, or, if the person does not have a registered office, the person’s head office is in the United Kingdom, or the person's registered office is outside of the United Kingdom (or, if the person does not have a registered office, the person's head office is outside of the United Kingdom) but it is providing or receiving the ESG rating (as the case may be) through an establishment maintained by it in the United Kingdom, and in relation to a natural person, means a person who is able to satisfy the requirements of the statutory residence test as set out in Schedule 45 to the Finance Act 2013 at the time that the ESG rating is made available to them; “make”, in relation to an investment specified in Part 3, includes, but is not limited to— buying, selling, subscribing for, exchanging, redeeming, holding or underwriting the investment, or exercising or not exercising any right conferred by such an investment to buy, sell, subscribe for, exchange or redeem such an investment; “making available”, in relation to an ESG rating, includes, but is not limited to, issuing the rating to another person in hard-copy or electronic form or publishing on a website or other digital medium, and references to the rating having been made available are to be construed accordingly; “providing”, in relation to an ESG rating, means producing it and making it available, and a person (“P”)— does not provide an ESG rating unless they both produce it and make it available, and is to be regarded as providing an ESG rating to a person located in the United Kingdom (“R”) where P— is not located in the United Kingdom, and produces and makes available an ESG rating to a person other than R in circumstances where P could reasonably expect the rating to be made available to R; “provision of a benchmark” has the meaning given in Article 3(1)(5) of the UK Benchmarks Regulation and “provide a benchmark” is to be construed accordingly; “rating category” includes, but is not limited to, a variable or division within a system, such as a letter, number, symbol, colour or temperature, that provides a relative measure to distinguish one or more characteristics of various rated items; “supervised entity” has the meaning given in Article (3)(1)(17) of the UK Benchmarks Regulation; “the UK Benchmarks Regulation” means Regulation EU 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014, as it forms part of assimilated law; “the UK CRAR” means Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies. .