The International Organization of Securities Commissions (IOSCO) has made a fact-finding exercise on these topic, revealing that:

A. There is little clarity and alignment on definitions, including on what ratings or data products intend to measure;

B. There is  a lack of transparency about the methodologies underpinning these ratings or data products;

C. While there is wide divergence within the ESG ratings and data products industry, there is an uneven coverage of products offered, with certain industries or geographical areas benefitting from more coverage than others, thereby leading to gaps for investors seeking to follow certain investment strategies;

D. There may be concerns about the management of conflicts of interest where the ESG ratings and data products provider or an entity closely associated with the provider performs consulting services for  companies that are the subject of these ESG ratings or data products; and

E. Better communication with companies that are the subject of ESG ratings or data products was identified as an area meriting further attention given the importance of ensuring the ESG ratings or other data products are based on sound information.

To understand the implications of the activities of ESG ratings and data products providers the the Board of IOSCO has published a consultation. Comments may be submitted before 6 September 2021.

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