IOSCO offered a set of recommendations addressing ESG ratings and data product providers.
In a new report, IOSCO recommended that regulators take action to (i) promote transparency in the methodologies that ESG ratings and data product providers use, (ii) ensure the use of appropriate procedures for managing conflicts of interest, and (iii) improve communication channels between ratings providers and covered entities, without undermining providers' neutrality. Further, IOSCO recommended that regulators "could consider a number of factors related to issuing high quality ratings and data products, including publicly disclosed data sources, defined methodologies, management of conflicts of interest, high levels of transparency, and handling confidential information," and "that users of ESG ratings and data products could consider conducting due diligence on the ESG ratings and data products that they use within their internal processes."
IOSCO noted that growth in the market for ESG ratings and data is partially due to the lack of consistent disclosures at the entity level.
Primary Sources
- IOSCO Press Release: IOSCO calls for oversight of ESG Ratings and Data Product Providers
- IOSCO Report: Environmental, Social and Governance (ESG) Ratings and Data Products Providers
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