MAS Sets the Standard: ESG Rating Providers Embrace Transparency with New Code of Conduct

MAS Sets the Standard: ESG Rating Providers Embrace Transparency with New Code of Conduct

Singapore, December 6, 2023 – The Monetary Authority of Singapore (MAS) has taken a significant step towards enhancing transparency in the Environmental, Social, and Governance (ESG) space by publishing its finalized Code of Conduct for ESG Rating and Data Product Providers. Following a successful public consultation from June to August 2023, this groundbreaking initiative aims to establish industry-wide standards for transparency, governance, and conflict management.

1. Setting the Stage for Industry Standards

MAS’s Code of Conduct (CoC) serves as a pioneering framework, setting baseline standards aligned with the International Organisation of Securities Commissions’ (IOSCO) recommendations. The CoC focuses on ensuring transparency in methodologies and data sources, effective governance, and managing conflicts of interest that could compromise the reliability of ESG products.

2. Strong Industry and User Support

The response from industry participants and users during the public consultation has been overwhelmingly positive, with strong support expressed for the CoC. Acknowledging the need for third-party assurance or audit of providers’ self-attestations on the accompanying Checklist, the CoC aims to instill confidence in users regarding the integrity of ESG data and ratings.

3. Encouraging Adoption and Disclosure

MAS encourages ESG rating and data product providers to publicly disclose their adoption of the CoC and share their completed Checklist within 12 months from the publication of the CoC. To facilitate easy identification of compliant providers, MAS has collaborated with the International Capital Market Association (ICMA) to host a list of such providers on ICMA’s website.

4. A Catalyst for Market Confidence

Mr. Lim Tuang Lee, Assistant Managing Director (Capital Markets) at MAS, emphasized that the CoC will play a pivotal role in boosting market confidence in the use of ESG rating and data products. The baseline transparency standards are expected to enhance the comparability of ratings and data products, empowering investors to make more informed decisions in the ever-evolving landscape of ESG investing.

5. Future Regulatory Considerations

MAS remains committed to monitoring industry developments and global regulatory landscapes, with an openness to further enhancing the regulatory regime for ESG rating and data product providers based on evolving needs and best practices.

6. Embracing a Sustainable Future

The Code of Conduct aligns with global efforts towards sustainable finance, encouraging ESG product providers to consider forward-looking elements in their offerings. This, in turn, enhances investors’ ability to assess how investee entities respond to transition risks and opportunities, further supporting informed decision-making in funding the climate transition.

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Source: Monetary Authority of Singapore