Technology & Data

EFAMA Calls for ESG Data Code of Conduct

A trade body for the European investment industry has welcomed political agreement on the EU ESG Ratings Regulation, but urged policymakers not to delay work on a code of conduct for data products. The European Fund and Asset Management Association (EFAMA) said the European Parliament’s vote in favour of a new regulation was a “significant move” towards providing investors with transparent and dependable ESG-related ratings information. The new rules will ensure mandatory disclosures on E, S and G factors, their respective weightings, and methodologies used. ESG rating providers will no longer be allowed to provide credit rating, auditing or consultancy services to avoid conflict of interest. EU-based providers will be authorised and supervised by the European Securities and Markets Authority (ESMA), while those from outside the EU will require endorsement, recognition or equivalence. EFAMA also noted the lack of regulation for other ESG data products in the EU, saying legislators should not wait for a future review of the ratings regulation to develop a regulatory framework or a code of conduct for third-party ESG data products. The International Organization of Securities Commissions and ESMA have both stressed the need for regulatory frameworks to include all ESG data products, while in the UK, an industry-led working group convened by the Financial Conduct Authority has developed a code of conduct for both ESG data and ratings providers. “Covering ESG ratings in this regulation is a necessary step forward to drive the transition towards a greener economy,” said Chiara Chiodo, Regulatory Policy Advisor at EFAMA. “Hopefully, EU policymakers will be looking at remaining ESG data issues when setting their priorities to boost the Capital Markets Union during the next legislative mandate.”

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