IRSG to set up industry working group developing a voluntary code of conduct for ESG data and ratings providers

Published 22 Nov 2022

The International Regulatory Strategy Group (IRSG) has today announced that it will be the joint secretariat with the International Capital Market Association (ICMA), for a new industry working group with a mandate from the Financial Conduct Authority to develop a voluntary code of conduct for Environmental, Social, and Governance (ESG) data and rating providers. 

The ESG Data and Ratings Code of Conduct Working Group (DRWG) follows on from the report published by the IRSG in February which called on policymakers to adopt principles-based and proportionate regulation for the ESG ratings market.

The IRSG – which is co-sponsored by TheCityUK and the City of London Corporation – highlighted in the report the need to address current challenges faced by the market to ensure it is fit for purpose and can properly support practitioners in assessing the risks and opportunities of potential ESG investments.

The group will be co-chaired by M&G, Moody’s, London Stock Exchange Group (LSEG) and Slaughter and May, and will be composed of stakeholders including investors, ESG data and ratings providers, and rated entities. The group will meet for the first time in December this year.

Chair of the IRSG, Kay Swinburne, said:

“I am delighted that the IRSG has been mandated by the FCA to co-lead on this work, which shows how the FS sector can collaborate in order to contribute to effective policy making.

“As ESG becomes more integrated into their activities and the range ESG focussed product offerings expands, firms are increasingly reliant on third party data and rating services. It is therefore crucial that market users and investors have confidence in ESG ratings when making investment decisions.

“A comprehensive, proportionate and globally consistent voluntary code of conduct for ESG ratings and data will help ensure this market is fit for purpose, in turn supporting market practitioners to assess the risks more accurately.”

Chair of the IRSG ESG Committee, Michael Collins, said:

“This is excellent news and testament to the quality of the original report that the IRSG produced earlier this year. It is a valuable opportunity for us to contribute to the sustainable finance regulatory agenda as the UK becomes only the second country in the world to develop a Code of Conduct for ESG Ratings.”