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Amid growing demand for environmental, social and governance standards, the International Organization of Securities Commissions (IOSCO) is calling for greater oversight of ESG ratings and data providers.

The umbrella group of global regulators published a report Tuesday that sets out recommendations for regulators to follow in establishing requirements for ESG ratings and data, and the firms that provide these products.

IOSCO reported that a review of ESG ratings and data found a lack of clarity and standards in this market, a lack of transparency about the methodologies underpinning ratings, and uneven coverage of sectors and geographies.

The review also noted that “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.”

The market for ESG ratings and data has grown in recent years, IOSCO noted, partly due to a lack of standardized ESG disclosures from issuers.

“ESG ratings and third-party data products have played an important role in the ESG ecosystem so far, especially in the absence of consistent and comparable issuer disclosures,” noted Ashley Alder, chairman of IOSCO and CEO of the Hong Kong SFC, in a release.

“Their significance and usefulness will only continue as capital markets intensify efforts to support the shift towards a net zero economy. This is why IOSCO has undertaken this work,” he said.

Regulating the firms that provide data and analytics in this area could enhance investor trust in ESG ratings and data, IOSCO suggested.

The report sets out specific recommendations and provides guidance for regulators on developing requirements and oversight in this area.

“The recommendations include promoting more transparency regarding the methodologies that ESG ratings and data product providers use in developing their products, ensuring their procedures for managing conflicts of interest are appropriate, and improving communication channels between providers and the entities covered by their ESG ratings…without undermining their impartiality,” IOSCO noted.

“This report represents an important milestone in the development of ESG markets,” said Erik Thedéen, chair of the IOSCO Sustainable Finance Task Force and director general of Sweden’s Finansinspektionen.

“Investors should be able to understand and trust the ESG ratings and data products they use; implementation of IOSCO’s recommendations will help achieve that outcome,” he added.

On Nov. 1, the CFA Institute released its final ESG disclosure standards for investment products.