FCA Announces Code of Conduct for ESG Ratings Providers
The FCA has announced the formation of a group to develop a Code of Conduct for providers of Environmental, Social, and Governance (ESG) data and ratings.
Financial services organisations are increasingly relying on third-party ESG data and ratings services as they integrate ESG into their activities and extend their ESG-focused products.
In its Feedback Statement on ESG Integration in UK Capital Markets (FS22/4), the FCA said it was in favour of putting some ESG data and ratings providers under the supervision of regulators. This would help the market for ESG data and ratings services be more open and build trust.
If the Treasury expands the FCA's regulatory perimeter, it has committed to taking the necessary steps to develop and consult on a proportionate and effective regulatory regime, with a focus on outcomes in areas highlighted in IOSCO recommendations. These include transparency, good governance, management of conflicts of interest, and systems and controls.
While the government examines this, FCA has worked to organise, promote, and encourage industry players to develop and adhere to a voluntary Code of Conduct.
It welcomes the International Capital Market Association (ICMA) and the International Regulatory Strategy Group (IRSG) as the Secretariat in charge of this activity. This Secretariat has a thorough understanding of both the UK and worldwide financial markets, and it will ensure that all important stakeholder groups are represented in an unbiased and fair manner.
Industry-led solutions will help meet the goals of the FCA's ESG Strategy by promoting the faster development of best practices. The Code will try to be the same everywhere by taking into account not only IOSCO's suggestions but also changes in places like Japan and the EU. This will aid in the creation of globally consistent standards.
FCA will keep working with its regulatory partners around the world, such as through IOSCO's recently announced Call to Action, to push for a coordinated approach to the development of the Code. A Code might also continue to apply to providers of ESG data and ratings who are not subject to potential future regulation.