The voluntary code aims to enhance transparency and improve comparability and reliability of ESG data and scores.

By Paul A. Davies, Farhana Sharmeen, Michael D. Green, James Bee, and Kevin Mak

The Monetary Authority of Singapore (MAS) has published a Code of Conduct for Providers of Environmental, Social, and Governance (ESG) Rating and Data Products (Code), and an accompanying compliance checklist for providers (Checklist), following a public consultation conducted from June to August 2023. The Code covers best practices on governance, management of conflicts of interest, and transparency of methodologies and data sources, including disclosure on how forward-looking elements are taken into account in data products. This disclosure is intended to allow users to better consider transition risks and opportunities when determining capital allocation.

For more details on the initial consultation, please see this Latham article.

The Code will apply to:

• product providers based in Singapore and providing ESG ratings or data products relating to activities and institutions in the securities and derivatives industry; and
• product providers based overseas but providing ESG ratings or data products relating to activities and institutions in the securities and derivatives industry in Singapore.

The MAS is encouraging providers to disclose their adoption of the Code and publish their completed Checklist within 12 months from publication of the Code. In addition, providers must apply the Code on a “comply or explain” basis (i.e., providers are expected to comply with the Code or explain why they are not in compliance).

The MAS has also encouraged market participants that use ESG ratings and data products to engage with providers that adopt the Code. Accordingly, the International Capital Market Association has agreed to host on its website the list of providers that adopt the Code to enable market participants to easily identify providers that have publicly adopted the Code.

Next Steps

The MAS is considering a phased approach to regulating the ESG Rating Providers as Capital Markets Services licensees under the Securities and Futures Act 2001. Further public consultation will be conducted when MAS takes formal steps towards developing a regulatory regime.

Latham & Watkins will continue to monitor developments relating ESG regulatory updates in Singapore and globally.