The International Capital Market Association (ICMA) and International Regulatory Strategy Group (IRSG) have introduced a new Environmental, Social and Governance (ESG) code of conduct. This is in response to a growing demand for transparency and standardization in ESG ratings and data products.
- The code of conduct aims to address the increasing reliance on third-party data and ratings in the ESG market.
- The framework is designed to promote transparency, good governance, and conflict of interest management, and strengthens systems and controls within the ESG sector.
- It aligns with global standards set by International Organization of Securities Commissions (IOSCO) and will serve as a benchmark for providers.
- The UK government and Financial Conduct Authority (FCA) are considering extending regulatory boundaries to include ESG ratings providers, and this code will serve as a reference point.
The ICMA is known for its influential role in the capital market sector, providing a platform for industry stakeholders, promoting best practices and maintaining standards. On the other hand, the IRSG plays a key role in shaping regulatory strategies and bridging the gap between finance and policy. Through this collaboration, both organizations aim to promote sustainable finance and address the demand for more consistency and reliability in the ESG market.
The new code of conduct emphasizes the importance of good governance and the management of conflicts of interest. It also aims to strengthen the systems and controls within the ESG sector to ensure alignment with global standards. The code is designed as a voluntary framework but sets a potential benchmark for providers outside the scope of future regulation.
This industry-owned code aligns with the International Organization of Securities Commissions’ (IOSCO) recommendations, marking a significant step towards harmonized global practices in ESG reporting. In the first half of 2023, the UK government, in consultation with the FCA, explored extending regulatory boundaries to include ESG ratings providers, and this new code was considered throughout the deliberations.
Sacha Sadan, FCA Director of ESG, said, “With its strong focus on international consistency, this industry-owned code will play a key role in increasing transparency and trust in the ESG data and ratings market. We encourage all ESG data and ratings providers to engage with and sign up to the code.”
