SFC supports and sponsors the development of an industry-led voluntary code of conduct for ESG ratings and data products providers

On October 31, 2023, the Securities and Futures Commission of Hong Kong (SFC) published a press release to inform that it will be supporting the development of a Voluntary Code of Conduct (VCoC) for Environmental, Social, and Governance (ESG) ratings and data product providers in Hong Kong. The VCoC is planned to be established by an industry-led working group, the Hong Kong ESG Ratings and Data Products Providers VCoC Working Group (VCWG) with the International Capital Market Association (ICMA) acting as the Secretariat for the Working Group. Various Hong Kong regulators, including the SFC itself, the Hong Kong Monetary Authority, and the Insurance Authority will act as observers to the Group.
The proposed Voluntary Code of Conduct aims to align with international best practices recommended by the International Organization of Securities Commissions (IOSCO). Its key objective is to enhance transparency, quality, and reliability of ESG information used by licensed corporations in their investment decisions and to prevent greenwashing in investment products. The initiative to establish such voluntary code stems from an SFC fact-finding exercise among asset managers which identified concerns about data quality, transparency, and conflicts of interest management among ESG ratings and data product providers. A corresponding report on these findings was concurrently published by the SFC.
To conclude, the SFC notes that „the proposed VCoC, which will be open for ESG ratings and data products providers to sign up voluntarily, is expected to provide a streamlined and consistent basis for asset managers to conduct due diligence or on-going assessment on ESG service providers“.