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Yesterday, the ESG Data and Ratings Working Group (DRWG) (an industry group convened by the FCA and comprising of the International Capital Market Association (ICMA) and the International Regulatory Strategy Group (IRSG)) published a new voluntary Code of Conduct for ESG ratings and data products providers (the Code).
The Code is closely aligned with the recommendations contained in the final report “Environmental, Social and Governance Ratings and Data Products Providers” of the International Organisation of Securities Commissions (IOSCO) and represents a milestone towards reaching international consistency for the providers of market critical third-party data and ratings products.
Key themes of the Code include increasing scrutiny, transparency, trust, quality, reliability, efficiency, good governance, management of conflicts of interest and improving and strengthening sound systems and controls in the growing market for the provision of ESG data products and ratings. It is hoped that the Code will assist financial services firms to better understand and use ESG ratings and data products, help investors to make good investment decisions and reduce the risks associated with greenwashing.
The Code is expressed to be “internationally interoperable” and is intended to work consistently and coherently across the globe including, potentially, in jurisdictions where there are no locally applicable standards and across the wide spectrum of providers that operate in the global market for ESG ratings and data products. The ICMA has ownership of the Code going forward and, along with the FCA, has encouraged all ESG ratings and data products providers to engage with and sign up to the Code.
The FCA has consulted on whether the UK's regulatory perimeter should be extended to include ESG data and ratings providers and is currently considering its next steps in this regard.
Our ESG and financial services regulation specialists can be reached by clicking these links and you can read more about the FCA's recent activity in relation to ESG here.
As part of the FCA ESG Strategy, we committed to using our voice and influence to promote globally aligned solutions where possible. With its strong focus on international consistency, this industry-owned Code will play a key role in increasing transparency and trust in the ESG data and ratings market. We encourage all ESG data and ratings providers to engage with and sign up to the Code
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