Hold on to your hats for a torrent of new abbreviations. Hong Kong’s Securities and Futures Commission (SFC) recently announced its support of an industry-led voluntary code of conduct for ESG ratings and data providers. The Voluntary Code of Conduct (VCoC) will be developed by an industry working group the Hong Kong ESG Ratings and Data Products Providers Working Group (VCWG). The VCWG will be led by the International Capital Market Association (ICMA). The VCoC will also conform to international best practices recommended by the International Organization of Securities Commissions (IOSCO). The SFC said about it’s new voluntary code:
“The initiative is the culmination of the SFC’s fact-finding exercise and industry outreach conducted since mid-2022 to understand matters related to the ESG ratings and data products providers, which are not regulated by the SFC. The exercise found that surveyed asset managers highlighted common concerns about data quality, transparency, and conflicts of interest management of the providers, and that the IOSCO recommendations should be encouraged for adoption by ESG ratings and data product providers.”
Hong Kong’s voluntary code is reminiscent of the Japanese voluntary Code of Conduct for ESG Evaluation and Data Providers which was published in December of 2022. As voluntary codes of conduct proliferate, some jurisdictions like the EU are considering mandatory regulation for ESG raters. It remains to be seen if voluntary codes of conduct will remain voluntary, or if regulators will eventually transpose the codes into binding regulations – especially as more countries look to regulating ESG ratings organizations. And creating more acronyms and abbreviations.
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