In June the Monetary Authority of Singapore published a consultation paper on the proposed voluntary industry code of conduct for providers of ESG ratings and data products. The proposed code covers best practices on governance, management of conflicts of interest, and transparency of methodologies and data sources. 

ESG rating providers leverage technology and data analytics to assess and evaluate companies on ESG, using software tools, databases, and algorithms to analyze and process data related to ESG factors, as well as involving human expertise and qualitative analysis.

The rationale for bringing ESG rating providers into its regulatory remit is to increase accountability for rating providers, and encourage the provision of quality and credible ESG ratings. Gatekeeping and supervisory requirements by the MAS would ensure that ESG rating providers operating in Singapore (a) are fit and proper, (b) have in place proper governance structure, expertise and resources to produce quality and credible ESG ratings, and (c) meet the requirement on transparency in methodologies and data sources.

MAS proposed to define “ESG data product” as data products that collect and / or aggregate raw data, to which estimations, calculations or analysis have been added, and that are marketed as providing either a specific ESG focus on an entity, a real estate investment trust, a business trust or a capital markets product’s environmental, social or governance profile or characteristics.

The regulatory landscape for ESG rating providers is still at a nascent stage. Jurisdictions such as the UK, EU, Japan and India are in the midst of developing regulatory approaches for ESG rating and data product providers, with varying approaches taken by different regulators. 

Singapore's MAS remains committed to keep abreast of global developments and coordination in drawing up regulatory requirements. For more information, read our full briefing.

We have covered the related developments in the UK, EU and Japan in the following blog posts:

• FCA launches consultation on a Code of Conduct for ESG Ratings and Data Product Providers (linklaters.com)
• EU Commission proposes authorisation and new rules for ESG rating providers: expect tight timeframes, especially if you’re outside the EU (linklaters.com)
• Financial Services Agency of Japan introduces number of ESG developments, Sayako Shiraki, Eriko Kadota (linklaters.com)

Read more on ESG issues in our sister Linklaters blog - Sustainable Futures