Singapore’s MAS proposes code of conduct for ESG ratings and data products

Rick Steves

“The industry code of conduct will help give greater confidence to financial market participants using ESG ratings and data products”

As part of a proposed approach centered on an industry code of conduct that was co-created by MAS with industry players, the Singapore regulator has launched a public consultation on an industry code of conduct for providers of Environmental, Social, and Governance (ESG) ratings and data products.

The Monetary Authority of Singapore (MAS) intends to monitor the implementation of the industry code and observe global developments before taking further steps to formalise a regulatory framework for ESG rating providers.

ESG ratings help provide an assessment of the impact of ESG factors on an entity.

ESG data products provide information on the various ESG factors, customised to specific needs.

Disclosure of forward-looking elements is critical for more accurate market pricing signals

Lim Tuang Lee, Assistant Managing Director (Capital Markets), MAS, said: “The industry code of conduct will help give greater confidence to financial market participants using ESG ratings and data products. The call for product providers to disclose how forward-looking elements such as an entity’s transition plans are considered in their products, is critical for more accurate market pricing signals related to climate risks and opportunities.”

The proposed code of conduct for providers of ESG ratings and data products establishes minimum industry standards of transparency in methodologies and data sources, governance, and management of conflicts of interest.

The use of ESG ratings and data products for investing and capital allocation is increasingly becoming mainstream to address sustainability-related risks and opportunities in capital allocation decisions.

IOSCO’s recent report on the matter, however, highlighted the lack of transparency of methodologies and data sources, governance and controls, as well as management of conflicts of interest as key areas of concern.

Co-created with ESG rating and data product providers, and modeled closely after IOSCO’s recommendations of good practices, MAS proposes a first step in establishing standards on the quality, reliability, and transparency of ESG ratings and data products in Singapore.

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