FCA announces development of ESG Code of Conduct

The formation of a group to develop a Code of Conduct for environmental social and governance (ESG) data and ratings providers has been announced by the Financial Conduct Authority (FCA).

In a feedback statement on ESG integration in UK capital markets earlier in the year, the FCA expressed support for introducing regulatory oversight of certain ESF data and rating providers.

This would, according to the FCA, support greater transparency and trust in the market for ESG data and market ratings services.

The authority stated that, if the treasury extends the FCA’s regulatory perimeter, it committed to take the “necessary steps” to develop and consult on a proportionate and effective regulatory regime, with a focus on outcomes in areas highlighted in the International Organization of Securities Commission’ (IOSCO) recommendations.

These include transparency, good governance, management of conflicts of interest, and systems and control.

The FCA also stated that, while the government considered this, it has worked to convene, support and encourage industry participants to develop and follow a voluntary Code of Conduct.

It also detailed the construction of the group, stating that the appointment of the International Capital Market Association (ICMA) and the International Regulatory Strategy Group (IRSG) as the secretariat leading the work was “welcomed”.

The secretariat offers an in-depth understanding of both the UK and global financial markets and will ensure an unbiased and balanced representation of all jet stakeholder groups.

According to the FCA, the secretariat will convene an independent group to develop the code. Consistent with their respective objectives, the FCA, the Bank of England and other relevant financial regulators and government departments will sit as active observers to this group.

The group will be co-chaired by M&G, Moody’s, London Stock Exchange Group (LSEG) and Slaughter and May, and will be composed of stakeholders including investors, ESG data and ratings providers, and rated entities and the group will aim to meet for the first time later this year.

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