The IFSCA Official recently issued a circular on October 30, 2024, introducing a comprehensive framework for ESG Ratings and Data Products Providers (ERDPPs) operating in the International Financial Services Centre (IFSC). This circular establishes the necessary rules and regulations to enhance the ESG ecosystem, ensuring accountability, governance, and transparency in ESG-related services.
What Are ESG Ratings and Data Products?
ESG Ratings: Includes tools like ESG scores, rankings, thematic scores, and sector-specific ratings, designed to evaluate sustainability and social responsibility.
ESG Data Products: Comprise a wide array of services and information to assess a company's environmental, social, and governance metrics.
Why This Framework?
Global Demand: With net-zero targets, investor preferences for responsible businesses, and mandatory ESG disclosures under various international regulatory frameworks, ESG ratings are pivotal.
Regulatory Push: Bodies like IOSCO and SEBI have provided recommendations and frameworks to regulate these providers effectively.
Key Features of the Framework
Registration Requirements
Eligibility: Entities must be established in the IFSC via branches, LLPs, companies, or other approved structures.
Net Worth: A minimum of USD 25,000 must be maintained at all times.
Fit and Proper Criteria: Applicants, along with their key personnel, must meet qualification, financial soundness, and good governance standards.
Permitted Activities
ESG Ratings: Includes creating scores for sustainable finance instruments.
ESG Data Products: Providers can assist with independent reviews of ESG-labeled bonds listed in the IFSC.
Governance and Compliance
Principal and Compliance Officers: Entities must appoint qualified professionals to oversee operations and ensure regulatory compliance.
Code of Conduct: Providers must adhere to principles of governance, transparency, confidentiality, and conflict management.
Operational Oversight
Audit and Disclosure: Annual audits and continuous disclosures of ESG ratings on the provider’s website are mandatory.
Segregation of Activities: ESG-related services must remain separate from other business activities.
How Does This Help?
This framework empowers entities to offer robust, transparent, and high-quality ESG ratings and data products while aligning with global best practices. It also fosters a sustainable ecosystem in IFSC, positioning it as a leader in responsible investment practices.
For Aspiring Providers
Entities interested in becoming ESG Ratings and Data Products Providers must apply via the IFSCA’s online portal, meeting all eligibility and compliance norms.
🌱 This framework is a game-changer for businesses and investors who prioritize sustainability while ensuring compliance with international standards.
Let’s work together towards a more responsible and sustainable financial ecosystem!
What are your thoughts on the IFSC’s new ESG framework? Let’s discuss in the comments!
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