Industry group launches world-leading Code of Conduct for ESG Ratings and Data Product Providers
The International Regulatory Strategy Group (IRSG) has expressed support for a new, voluntary code of conduct for ESG (Environmental, Social, and Governance) ratings and data product providers. This provisional code, the first of its kind, is currently open for consultation.
Initiated by the ESG Data and Ratings Code of Conduct Working Group (DRWG) and backed by the International Capital Market Association (ICMA), the code aims to increase consistency, transparency, and accountability within the financial services industry. The ultimate goal is to enhance the market’s faith in the integrity of ESG Ratings and Data products by improving the systems, procedures, and controls in place.
As sustainable finance becomes an integral component in the global push towards net zero, there is a growing need for reliable ESG ratings and data products. These tools are vital for accurately illustrating corporate sustainability efforts to consumers and investors alike.
The Code of Conduct proposes several key best practice principles:
- Good governance, encompassing transparency and conflict management.
- Effective systems and controls, ensuring product quality, consistency, and stakeholder engagement.
- Active management of potential conflicts of interest that could jeopardize rating objectivity.
- Prioritizing public disclosure and transparency in ESG ratings and data products.
The DRWG, jointly led by a Steering Committee featuring Angela Brown from Moody’s Analytics, Rob Marshall from M&G, Nick Bonsall from Slaughter and May, and David Harris from the London Stock Exchange Group, was commissioned by the FCA (Financial Conduct Authority).
The committee hopes that the code, designed with international consistency in mind, will be a crucial step in creating universal standards for ESG ratings and data product providers.
Interim Co-Chair of the IRSG Council, Chris Hayward, emphasized that a globally consistent code of conduct would bolster investor confidence and facilitate capital flow for the urgent transition to net zero. The consultation period for the draft code runs from 5 July to 5 October 2023.
