The Monetary Authority of Singapore (MAS) has issued a Code of Conduct (Code) for providers of Environmental, Social, and Governance (ESG) rating and data products, as reported by ESG Today on December 7. The Code, rolled out on a voluntary basis, adopts a “comply or explain” approach for these providers. This means providers either comply with the principles and best practices set out in the Code or explain publicly why they do not. Key principles outlined in the Code include the implementation of established policies and procedures ensuring that ratings and data products are based on a comprehensive analysis of all relevant information, offering transparency around the methodologies and data sources used for the products, and formulating policies to ensure independence and to identify, avoid, manage, and disclose potential conflicts of interest.

The Code aims to build market confidence in the use of ESG rating and data products while improving their comparability, according to the MAS. In addition, the Code is poised to help ESG product investors make informed decisions. As investors increasingly integrate ESG considerations into their investment process, the demand for ESG ratings and data is booming. To regulate this emerging industry, the International Organization of Securities Commissions (IOSCO) has provided a range of recommendations for regulators. These recommendations include requiring providers to identify and disclose potential conflicts of interest, and to consider the data and methodologies they use. According to the MAS, its new Code builds on these IOSCO recommendations.

Sources:

https://www.esgtoday.com/mas-releases-finalized-code-of-conduct-for-esg-ratings-and-data-providers/

https://www.mas.gov.sg/news/media-releases/2023/mas-publishes-code-of-conduct-for-providers-of-esg-rating-and-data-products

https://www.straitstimes.com/singapore/mas-publishes-code-of-conduct-for-providers-of-esg-rating-and-data-products