The Monetary Authority of Singapore (MAS) is proposing an industry code of conduct for providers of Environmental, Social, and Governance (ESG) ratings and data products.
ESG ratings help provide an assessment of the impact of ESG factors on an entity. Meanwhile, ESG data products provide information on the various ESG factors, customised to specific needs.
As the integration of sustainability-related risks and opportunities into capital allocation decisions become increasingly mainstream, the use of ESG ratings and data products for investing and capital allocation has grown.
The code of conduct establishes minimum industry standards of transparency in methodologies and data sources, governance, and management of conflicts of interest.
It was co-created with ESG rating and data product providers, and modelled closely after International Organization of Securities Commissions’ (IOSCO) recommendations of good practices as set out in its “Call for Action” paper.
The regulator said that it will monitor the implementation of the industry code and observe global developments before taking further steps to formalise a regulatory framework for ESG rating providers.
This would be a first step in establishing standards on the quality, reliability, and transparency of ESG ratings and data products in Singapore.
Interested parties are invited to submit their comments here by 22 August 2023.
Lim Tuang Lee, Assistant Managing Director (Capital Markets), MAS, said,
“The industry code of conduct will help give greater confidence to financial market participants using ESG ratings and data products.
The call for product providers to disclose how forward-looking elements such as an entity’s transition plans are considered in their products, is critical for more accurate market pricing signals related to climate risks and opportunities.”