On 26 July 2021, the International Organization of Securities Commissions (IOSCO) issued a consultation report intended to assist its members in understanding the implications of the activities of environmental, social and governance (ESG) ratings and data providers and in establishing frameworks to mitigate risks stemming from these activities.

The consultation report has five chapters:

  • Chapter 1 provides an overview of the market for ESG ratings and data products.
  • Chapter 2 discusses the current practices of ESG ratings and data products providers.
  • Chapter 3 discusses certain observations in relation to users of ESG ratings and ESG data products.
  • Chapter 4 elaborates on the interactions between companies that are the subject of ESG ratings or data products and ESG ratings and data products providers.
  • Chapter 5 discusses areas for improvement highlighted in a recent fact-finding exercise and sets out proposed recommendations for securities markets regulators, ESG ratings and data products providers, users of these products and services, and companies subject to these providers’ review.

The consultation report is an additional piece in the framework for sustainability that IOSCO is developing in close coordination with its members and other international organizations. The report on sustainability-related issuer disclosures, published in June, addresses data gaps at the corporate level. The report on recommendations on sustainability related practices, policies, procedures and disclosure in asset management, also issued in June, focusses on the activities of asset managers as an important agency-model business that channels investor capital into sustainable finance. It underscores the importance of ESG ratings and data products in the decisions made by these asset managers.

The deadline for comments on the latest consultation report is 6 September 2021.

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