SINGAPORE – An industry code of conduct has been formulated for providers of environmental, social and governance (ESG) ratings and data products.
In a statement on Dec 6, the Monetary Authority of Singapore (MAS) said it has published the code of conduct, along with a checklist for providers to attest to their compliance of the code.
This comes after a public consultation conducted from June to August, where respondents expressed strong support for the establishment of such standards, MAS said.
Users also agreed that providers’ self-attestation on the checklist should, where feasible, undergo third-party assurance or audit, MAS added.
The launch of the public consultation on the code of conduct was announced by Ms Indranee Rajah, Minister in the Prime Minister’s Office and Second Minister for Finance and National Development, in June.
Speaking at a conference organised by the International Capital Market Association (ICMA) held here in June, Ms Indranee had said that there was a need to establish minimum industry standards of transparency in ESG methodologies and data sources, governance, and management of conflicts of interest.
MAS said the code of conduct will establish baseline industry standards for transparency in methodologies and data sources, governance, and management of conflicts of interest that may compromise the reliability and independence of the products.
It builds upon the International Organisation of Securities Commissions’ recommendations for good practices for such providers, MAS added.
MAS encourages providers to disclose their adoption of the code of conduct, and publish their completed checklist within 12 months from publication of the code.
Providers which have publicly adopted the code will be listed on ICMA’s website. Users are encouraged to engage these providers, MAS said in the 13-page code of conduct.
In the same document, it is stated that the code is to be applied by ESG rating and data product providers on a “comply or explain” basis. This means providers either comply with the principles and best practices set out in the code, or explain why they are not in compliance.
Mr Lim Tuang Lee, MAS’ assistant managing director for capital markets, said the code of conduct will help to build market confidence in the use of ESG rating and data products, as well as improve the comparability of such products.
“The code also encourages disclosures on how forward-looking elements are considered in such products, which will improve investors’ assessments of investee entities’ responses to transition risks and opportunities,” Mr Lim added.
“Overall, the code will support informed decision-making by investors keen on funding the climate transition.”
