International Organisation of Securities Commissions (IOSCO)

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The International Organisation of Securities Commissions (IOSCO) is the international body that brings together the world’s securities regulators and is recognised as the global standard setter for the securities sector.

Its membership regulates more than 95% of the world’s securities markets in more than 130 jurisdictions: securities regulators in emerging markets account for 75% of its ordinary membership. IOSCO develops, implements and promotes adherence to internationally recognized standards for securities regulation. It works intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda. In November 2021, IOSCO said regulators should consider putting together a framework for ESG ratings and data products. IOSCO’s 10 recommendations for ESG ratings and data products:

1) Regulators could consider focusing more attention on the use of ESG ratings and data products and ESG ratings and data products providers that may be subject to their jurisdiction.

2) ESG ratings and data products providers could consider adopting and implementing written procedures designed to help ensure the issuance of high quality ESG ratings and data products based on publicly disclosed data sources where possible and other information sources where necessary, using transparent and defined methodologies.

3) ESG ratings and data products providers could consider adopting and implementing written policies and procedures designed to help ensure their decisions are independent and appropriately address potential conflicts of interest.

4) ESG ratings and data products providers could consider identifying, avoiding or appropriately managing, mitigating and disclosing potential conflicts of interest.

5) ESG ratings and data products providers could consider making adequate levels of public disclosure and transparency a priority for their ESG ratings and data products, including their methodologies and processes while maintaining a balance with respect to proprietary or confidential information, data and methodologies. This could include disclosures of the key performance indicators (KPIs) used to assess firms, relative weightings of each criteria, and the principal sources used.

6) ESG ratings and data products providers could consider adopting and implementing written policies and procedures designed to address and protect all non-public information received from or communicated to them by any entity, or its agents, related to their ESG ratings and data products, in a manner appropriate in the circumstances.

7) Market participants could consider conducting due diligence on the ESG ratings and data products that they use in their internal processes. This could include an understanding of what is being rated or assessed by the product, how it is being rated or assessed and, limitations and the purposes for which the product is being used.

8) ESG ratings and data products providers could consider improving information gathering processes with entities covered by their products in a manner that leads to more efficient information procurement for both the providers and these entities. For example, pre-inputting publicly available data in any requests to ensure they are correct and allowing covered entities to draw attention to any issues ahead of publication.

9) Where feasible and appropriate, ESG ratings and data products providers could consider responding to and addressing issues flagged by entities covered by their ESG ratings and data products while maintaining the objectivity of these products. The recommendations also encouraged ESG ratings and data providers to publish how and when they engage with covered entities.

10) Entities subject to assessment by ESG ratings and data products providers could consider streamlining their disclosure processes for sustainability related information to the extent possible, bearing in mind jurisdictions’ applicable regulatory and other legal requirements.

Links

International Organization of Securities Commissions website