FCA-led Industry Group Introduces Code of Conduct for ESG Ratings and Data Providers

December 15, 2023

The International Regulatory Strategy Group (IRSG) and International Capital Markets Association (ICMA) have developed a Code of Conduct for Environmental, Social, and Governance (ESG) ratings and data product providers. ICMA holds the responsibility for both the ownership and management of the code of conduct, as reported by FCA.

In 2022, the Financial Conduct Authority (FCA) in the UK designated ICMA and IRSG to establish an industry group to develop a global code for entities offering third-party data and ratings, increasingly integral to market operations.

Sacha Sadan, FCA Director of ESG, reportedly said, “As part of the FCA ESG Strategy, we committed to using our voice and influence to promote globally aligned solutions where possible.”

He also stated, “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.”

Following the recommendations from the International Organization of the Securities Commission (IOSCO), the code is designed to be embraced globally. The code aims to enhance transparency, good governance, management of interest conflict, and to strengthen systems within the sector.

The UK government in the first half of 2023, engaged in public consultation to expand FCA’s regulatory perimeter to encompass ESG rating providers.

In the year 2023 FCA has taken diverse measures to address data tools used in governance of financial services.

In March 2023, FCA established the ‘Synthetic Data Expert Group’ (SDEG) to explore the potential of synthetic data in finance. The established group encompassed a diverse group of 21 specialists from the financial sector, public agencies, data, and tech providers, as well as consumer groups. In November, FCA issued updates on the progress of the SDEG group.  The group will operate till November 2024 and will release a report on the real-life uses of synthetic data to help policymakers and practitioners.