The Securities and Futures Commission (SFC) of Hong Kong said that it “supports and sponsors” the development of a voluntary code of conduct for environmental, social and governance (ESG) ratings and data products providers.

The code of conduct will be developed by an industry-led working group, which will be led by the International Capital Market Association (ICMA).

The SFC, the Hong Kong Monetary Authority, and the Insurance Authority will sit as observers to the working group.

The code of conduct is expected to align with international best practices, as recommended by the International Organization of Securities Commissions (IOSCO).

It is expected to provide a streamlined and consistent basis for asset managers to conduct due diligence or on-going assessment on ESG service providers.

The SFC’s initiative comes in response to concerns from asset managers about data quality, transparency, and conflicts of interest management of ESG ratings and data product providers.

The code is expected to be open for ESG ratings and data products providers to sign up voluntarily.

“The Voluntary Code of Conduct will help strengthen the transparency, quality and reliability of ESG information used by licensed corporations in their investment decisions.

 

This is an important initiative to mitigate the risk of greenwashing in investment products.”

said Julia Leung, the SFC’s Chief Executive Officer.