Uncategorized » EFAMA’s call for ESG data code of conduct

EFAMA's call for ESG data code of conduct

As the industry continues to evolve, the need for a comprehensive regulatory framework for all ESG data products will become increasingly important

In the wake of political agreement on the EU ESG Ratings Regulation, the European Fund and Asset Management Association (EFAMA), a trade body for the European investment industry, has urged policymakers not to delay work on a code of conduct for data products.

The European Parliament’s vote in favour of a new regulation was hailed by EFAMA as a significant move towards providing investors with transparent and dependable ESG-related ratings information.

The new rules will ensure mandatory disclosures on Environmental, Social, and Governance (E, S, and G) factors, their respective weightings, and methodologies used.

In a bid to avoid conflict of interest, ESG rating providers will no longer be allowed to provide credit rating, auditing, or consultancy services.

EU-based providers will be authorized and supervised by the European Securities and Markets Authority (ESMA), while those from outside the EU will require endorsement, recognition, or equivalence.

The Need for Further Regulation?

While the new regulation is a significant step forward, EFAMA has noted that it does not cover all ESG data products.

The association has urged legislators not to 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.

Both the International Organization of Securities Commissions (IOSCO) and ESMA have stressed the need for regulatory frameworks to include all ESG data products.

In the UK, an industry-led working group convened by the Financial Conduct Authority (FCA) has developed a code of conduct for both ESG data and ratings providers.

EFAMA has echoed these sentiments, emphasizing the need for comprehensive regulation of all ESG data products to combat greenwashing and uphold transparency in ESG reporting.

The Future of ESG Data Regulation in the EU

Chiara Chiodo, Regulatory Policy Advisor at EFAMA, has expressed hope that EU policymakers will address the remaining ESG data issues when setting their priorities to boost the Capital Markets Union during the next legislative mandate.

The call for a code of conduct for ESG data products is a clear indication of the direction the industry is moving in.

The new ESG ratings regulation is a significant step forward, but it is clear that further work is needed to ensure comprehensive regulation of all ESG data products. As the industry continues to evolve, the need for transparent, reliable, and comprehensive ESG data will only become more critical.

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