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ESG ratings

As the ESG ratings landscape continues to evolve, an industry group convened under orders of the FCA has launched a provisional, voluntary code of conduct for ESG ratings and data product providers. As the consultation period draws to a close, the proposal shines a light on key considerations surrounding ratings and data products. The code of conduct covers six key principles for evaluating ratings and data providers: good governance, ways to ensure quality, conflicts of interest, transparency in methodologies and processes, confidentiality, and engagement with covered entities on the assessment process.

As reported in an article by the Financial Times, the Financial Conduct Authority (FCA’s) director of ESG, Sacha Sadan, described the consultation as an “important step” in increasing transparency and trust in the growing market for ESG data and ratings.

The development of the draft code is a logical step in the formalisation and acknowledgement of the range and impact that ratings and scoring providers have for investment, pension funds and other stakeholders. In what is a highly complex and increasingly difficult area to navigate, quality and transparency will help enable stakeholders to make more informed decisions about the products they use and provide a mechanism to feed directly into the process. The draft code’s introduction noted that numerous jurisdictions globally have developed legislative proposals or codes that refer to International Organization of Securities Commissions (IOSCO) recommendations. According to those leading the consultation, including officials from the London Stock Exchange, the goal of the proposed code is ensuring global interoperability and coherence for global ESG ratings and data providers.

The ESG Data and Ratings Code of Conduct Working Group (DRWG) has opened a consultation on the code until October 5, in a bid to enable confidence in the integrity of ESG ratings and data products.

Article originally published by Landmark Information Group.

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