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Draft Voluntary Code of Conduct for ESG Ratings and Data Product Providers For Consultation

October 2, 2023

The ESG Data and Ratings Working group (DRWG) is seeking feedback on the Draft Code of Conduct for Environmental, Social and Governance (“ESG”) Ratings and Data Product Providers. The consultation period will run from 5 July 2023 to 5 October 2023 and interested stakeholders are invited to submit their comments via email to In addition to feedback on the Draft Code of Conduct, we would welcome feedback on the consultation questions in Annex 1. The consultation will close on 5 October 2023 and the final code is due to be published at the end of 2023. Consultation submissions will not be made public. Instead, a feedback statement may be shared to capture key issues raised by stakeholders. 

General Feedback 

To begin with some context, Sylvera is a provider of carbon credit ratings (a “Carbon Credit Ratings Agency” or “CCRA”). We do not believe that we are the type of service that the Code of Conduct was developed to apply to, nor were the potential harms of ratings/data in the voluntary carbon markets (“VCMs”) considered – IOSCO’s work on its consultation commenced when Sylvera was pre-revenue and CCRAs were not represented within the DRWG nor referred to within the Code. 

Notwithstanding, Sylvera provides independent ratings of financial/environmental assets and there are certain core principles of governance that we seek to adhere to and which are set out in our Governance Framework. We are broadly supportive of initiatives to bring regulatory and quasi-regulatory oversight to the VCMs. We believe that such oversight will bring some of the trust that the VCMs need to be a societally accepted mechanism for directing climate finance. We think that the Code efficiently sets out the core principles that a ratings agency should adhere to and, despite not being the intended subjects, we therefore hope to voluntarily endorse the Code and would encourage other CCRAs to do the same.  

Needless to say, we are responding from the perspective of a CCRA with a fundamentally very different business model to the vast majority of “ESG ratings/data products providers” (an “ESGRDPP”).

We think that the Code is proportionate and would bring a beneficial minimum floor to governance amongst CCRAs. Despite being aimed at ESGRDPPs, we think the substance of the Code is equally applicable to CCRAs and CCRAs should not have significant difficulties in complying. Specifically, however:

  • There are typically potential conflicts of interest inherent in any revenue model for a rating agency. In an “issuer”-pays model, the issuer hopes to achieve a certain rating and may apply pressure to that end. In a buyer-pays model, the buyer may have exposure to the underlying projects/credits and therefore apply pressure to seek to influence certain ratings outcomes. We presume that 3.1 would never prohibit any business model or business lines and would allow for the disclosure of “standing” conflicts in revenue models, with specific, unique conflicts disclosed separately.

  • There is a lot of sensitive IP in the methodologies of the CCRAs and scientific rigor in the assessments performed (although this varies by CCRA). We expect this IP is much more advanced/scientific than that deployed by ESGRDPPs. We are fully supportive of ever-increasing transparency, but would hope that requirements to share (and include specific information in) methodologies remain flexible enough to allow for businesses to protect their sensitive IP.

  • With respect to confidentiality, there is a tension between protecting an entity’s confidential information and the independence of a CCRA. Namely, if there is arrangement that allows an entity to determine whether or not a CCRA can make reference to its confidential information in the rating, that allows a mechanism for the entity to allow inclusion on certain conditions (that may go to the outcome of the rating), or otherwise to refuse permission, meaning a CCRA is left between deciding whether to publish a rating that it knows could be materially incomplete, or to withdraw a rating that it has expended significant time preparing. We hope that any final provisions around the management of confidential information are not so prescriptive so as to jeopardize the independence of the rater. Ultimately, the rated entity always has the choice to not provide the confidential information. We acknowledge that the analysis is different when considering price-sensitive material non-public information, however, this is currently less of an issue in the VCMs than in ESG markets.


1. How would the proposed scope of this Code of Conduct interact with initiatives related to ESG ratings and data

products in other jurisdictions, such as existing or proposals for regulation or Codes of Conduct? Are there any particular issues that you think might limit its international interoperability with other similar initiatives?

The interoperability of future sources of regulation is critical to ensuring the regulatory burden remains proportionate and effective. We are aware that there are a large number of industry groups, regulators and quasi-regulators (e.g., ICVCM) globally looking at the VCMs at the moment and that without coordination, a lack of regulation could quickly be replaced by a hodgepodge of overlapping regulation. 

Our primary concern with any jurisdictional approach to regulation is not disproportionately increasing the regulatory burden. Since IOSCO has done such an impressive job of distilling the core principles, we would hope that IOSCO, the FCA and the DRWG can use their influence to push for recognized international equivalence provided that initiatives and regulatory regimes substantively follow the proposals of IOSCO (e.g., where the EU’s proposed regulations anticipate equivalence decisions to be made by ESMA).

The customers of CCRAs are highly global in their nature, meaning that allowing a regulatory or quasi-regulatory landscape to develop where CCRAs require permission in each jurisdiction that they have a customer would create a disproportionate regulatory burden for CCRAs, whilst creating the risk of lower quality, less reliable players setting up to service the needs of customers in markets that leading CCRAs have determined against seeking authorization or compliance in. 

Lastly and specific to the VCMs, whilst there are financial regulators with an interest in oversight over the more traditional financial markets aspects of the VCMs, there are also technical bodies (e.g., ICVCM) with an interest in the scientific and climate integrity of the VCMs. We hope that the Code and any subsequent iterations or future regulatory initiatives will be devised to be sensitive to the potential dual-oversight of CCRAs (vs. the more likely singular-oversight of ESGRDPPs). 

2. Taking into account the Code of Conduct’s degree of alignment with IOSCO recommendations and the consideration it gives to other international approaches (such as Japan’s and Singapore’s), do you think the Code of Conduct could and/or should serve as a global baseline for ESG ratings and data product providers?

Yes, as above, the approach seems a considered application of IOSCO’s recommendations, and would therefore be well placed to act as a global baseline for CCRAs.

Differentiation of ESG Ratings and Data products

3. Noting the distinction drawn between ESG ratings and data products, is the Code of Conduct sufficiently clear on how its Principles specifically apply to ratings products and/or data products?

We think so, however, we intend to comply in full so have not read the Code from the perspective of a data products-only provider. 

Forward-looking information

4. Some stakeholders have encouraged there to be an explicit statement as to whether a methodology incorporates forward-looking information, such as transition plans. We would welcome views on the proposal to include an action encouraging such disclosure.

Encouraging disclosure as to which aspects of a methodology are backward-looking and which are forward-looking, as well as how “real-time” data and events are considered if the assessment is point-in-time, would certainly be helpful to users of carbon credit ratings. 

From the perspective of CCRAs, forward-looking statements could include:

(i) for ex-post assessments of issued carbon credits relating to a certain period (or “vintage”), references within the rating to events, information or projections relating to a date after the assessed vintage that may indicate how credits are to be issued for the following vintage would be assessed, and

(ii) for ex-ante assessments of pre-issuance projects, any references as to how the project is likely to perform in the future.

The latter is more of a traditional forward-looking statement (i.e., it relates to a point in the future), whereas the former is forward-looking in that it gives an indication as to a CCRA assessment of the next vintage of credits from that project (albeit by reference to something that has already happened). 

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About the author
Head of Legal and Ops

Hayden Cooke is the Head of Legal and Ops at Sylvera. He studied History at the University of Oxford before starting his legal career at Slaughter and May. Prior to Sylvera, Hayden led the Legal and Compliance teams at a heavily regulated, international payments business. He works closely with the Policy team at Sylvera to ensure that incoming regulation will facilitate the scaling of the VCMs with integrity at the forefront.