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The draft ESG Ratings and Data Product Providers Code of Conduct

Built on IOSCO’s Final Report on Environmental, Social and Governance (ESG) Ratings and Data Product Providers, the ESG Data and Ratings Working Group (DRWG) was mandated by the UK FCA to build a Code of Conduct which can be applied globally. The Code of Conduct is heavily influenced by IOSCO’s recommendations for ESG ratings and data product providers which focussed on four main reform areas:

  1. Transparency;
  2. Governance;
  3. Systems and controls; and
  4. Management of conflicts of interest.

The alignment of the code to IOSCO’s recommendations has been done to achieve international interoperability and help emphasise the movement towards having a regulatory framework that is globally consistent.

The Code of Conduct is centred around six Principles and have context, actions, and outcomes aligned within them. The Principles aim to achieve four main outcomes introduced by IOSCO:

  • Good Governance – ESG ratings and data products are expected to incorporate appropriate governance arrangements which allow them to follow and promote the Code of Conduct’s Principles and objectives.
  • Securing Quality – the quality of ESG data and ratings products is essential for the Code’s success, and with this the integration of written policies and procedures that maximise quality are expected from ESG data and ratings providers. 
  • Conflicts of Interest – management of conflicts of interest including identification, avoidance, mitigation, and disclosure are expected from ESG data and ratings providers where they may potentially impact the operations and outcomes from ESG data and ratings providers.
  • Transparency – greater transparency around methodologies and processes are expected through public disclosures, all while ensuring confidentiality where appropriate (e.g., data and methodologies).

The Code of Conduct has been developed to be voluntary, and allows any entity that perceives the Code as relevant to their business and operations to implement it. This is deliberate as it acknowledges the wide range of ESG data and ratings providers, however, there is also a negative scope incorporated to highlight firms that were not the priority of the Code of Conduct. The negative scope includes:

  1. Credit rating agencies in respect of their offering of credit ratings;
  2. Entities producing ESG ratings/scores or data products that used in the same corporate group or affiliated companies and are not provided/marketed to third parties and
  3. Entities that have ESG consulting services but do not include the provision of an ESG rating/score or data product.

The Consultation also asks for feedback on the following areas:

  • Interoperability – how the Code of Conduct would interact with initiatives in other jurisdictions, and whether the Code should be a global baseline.
  • Differentiation of ESG Data and Ratings Products – if the Code clearly communicates the intended application of its Principles.
  • Forward Looking – opinions on whether the introduction of explicit statements should be included for forward-looking information in methodologies (e.g., transition plans).

The Consultation period runs until 5th October 2023, with the Final Code expected to be published before the end of 2023. While Consultation submissions will not be made public, there may be the creation of a feedback statement to incorporate key points and issues that stakeholders raised.


Table 1: Draft Code of Conduct Principles mapped against IOSCO recommendations:



About the author

Simba Mamboininga

Managing Partner

Delivering a 360° service to the asset management industry

Devlin Mambo

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