ICMA’s Code of Conduct for ESG Ratings and Data Products Providers – A Step Towards Consistent Global Standards

By: Carolyn Sng and Sook Young Yeu

The International Capital Market Association (ICMA) has released a voluntary code of conduct for ESG ratings and data products providers (the Code), reflecting recommendations by the International Organization of Securities Commissions (IOSCO). The Code is intended to be internationally interoperable and may be used by jurisdictions where no local code or regulation is in place.

The Financial Conduct Authority of the UK (FCA) had appointed ICMA and the International Regulatory Strategy Group to develop a globally consistent voluntary Code. The final Code was published following a consultation period and taking into account related developments in jurisdictions such as Japan, the EU, Singapore and Hong Kong. Going forward, ICMA will assume ownership of the Code.

The Code is intended to have broad application and relevance, catering for a wide spectrum of ESG ratings and data products providers (including providers of controversy alerts or second party opinions) although implementation of the Code may vary depending on the nature of the activities. However, the following categories of providers are specifically identified as not being the primary target for the Code:

  • credit rating agencies in respect of their offering of credit ratings. Where such agencies also offer ESG ratings/scores or data products, the intention is that the Code would be applicable;
  • entities who produce ESG ratings/scores or data products for use or consumption only within the same corporate group and not to third parties; and
  • entities whose commercial activities involve ESG consulting services that do not involve the provision of ESG ratings/scores or data products.

The Code further clarifies that proxy advisory services, investment research and financial benchmarks with an ESG or climatic focus that are caught by IOSCO’s Principles for Financial Benchmarks are outside the definition of ESG ratings/scores or data products.

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