Part of the Financial Services and Markets Act, the FCA welcomed the change, adding that it would improve transparency and trust in the market.
The FCA said it was developing its regime for ESG ratings in line with the legislation being finalised.
Accreditation and certification products, such as Energy Performance Certificate (EPC) ratings, will not be under the scope of regulation where the rating does not influence the decision to make a specified investment or the allocation of capital.
The regulator said ESG ratings played a “critical role” in influencing decisions to invest and allocate capital, and the legislation would give it the power to ensure transparent, reliable and comparable ratings.
The FCA will consult on its proposed rules before the end of the year.
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The regulator said: “We are committed to working with industry, government and wider stakeholders to ensure our approach to regulation is practical, proportionate and supports innovation. This is an opportunity to raise the bar for transparency and trust, while ensuring the market remains competitive and resilient.”
Its proposals will be informed by the International Organization of Securities Commissions (IOSCO) and focus on its four key areas: transparency, governance, systems and controls, and conflicts of interest.
Guidance will also be issued to help firms determine whether their activities fall under regulation and need authorisation.
The FCA added: “This will support our work to enhance the UK’s reputation as a global hub for sustainable finance – attracting investment and supporting growth and innovation.”
