Codes of Conduct for ESG Rating and Data Product Providers
S&P Global Sustainable1 Statement - ESG Rating and Data Product Codes of Conduct
S&P Global Sustainable1 (Sustainable1) has endorsed specific Codes of Conduct which are based on or seek to implement the November 2021 International Organisation of Securities Commissions (IOSCO) Recommendations for ESG Ratings and Data Product Providers. The codes endorsed by Sustainable1 are (1) the Code of Conduct for ESG Evaluation and Data Providers published by the Financial Services Agency of Japan (JFSA) and (2) the Code of Conduct for ESG Ratings and Data Products Providers published by the International Capital Markets Association (ICMA). Given the overlap of both codes and their lineage from the IOSCO recommendations, the representations below serve as Sustainable1’s unified statement on the application of these codes.
Sustainable1 Application of JFSA and ICMA Code of Conduct Principles
As the entity producing S&P Global ESG Scores, Sustainable1 issues the following statements in support and endorsement of the Code published by the Financial Services Agency of Japan and explains how we address the Code. Additionally, the principles (detailed below) are also applied to certain Sustainable1 data products that we believe fall within the scope of the ESG Data Products’ definition.
The ICMA Code of Conduct builds on the principles of the IOSCO recommendations, which the Code published by the Financial Services Agency of Japan is based on, with the addition of an overarching principle on Good Governance (ICMA Principle 1).
Our Approach
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Principle – Good Governance
Principle – Good Governance
ESG ratings and data products providers should ensure appropriate governance arrangements are in place that enable them to promote and uphold the Principles and overall objectives of the Code of Conduct.
This statement maps to Principle 1 in the ICMA Code.
Sustainable1 maintains appropriate governance arrangements to enable the Principles and overall objectives of endorsed Codes of Conduct and support good governance standards. This includes a clear organizational structure, defined roles and responsibilities, and commitments to quality, transparency, and conflict-of-interest management.
Sustainable1 continues to hire qualified personnel with the sustainability and financial knowledge needed for their roles. Its Compliance framework, related controls, policies, and training support effective conflict-of-interest management, help employees understand their responsibilities.
Sustainable1 has designed its organizational structure and governance model to address the evolving regulatory landscape and maintain clear oversight of models and methodologies. Sustainable1 governance committees operate under written charters that set out their mandates, membership, quorum, voting rights and roles and responsibilities of the members. These committees oversee the development, approval, periodic review, and material change of methodologies and models, with the aim of ensuring that analytical decisions are rigorous, consistently applied, and independent. Analytical activities are kept organizationally separate from commercial and sales activities, and written policies and procedures are in place to identify, avoid, or otherwise appropriately manage, mitigate and disclose actual or potential conflicts of interest that could compromise the independence, neutrality or integrity of Sustainable1's analytical output.
The independent Analytical Risk and Quality function assesses and monitors the quality and consistent application of the relevant methodologies and models.
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Principle - Securing Quality
Principle - Securing Quality
Ensure the quality of ESG evaluation and data - The basic procedures necessary for this purpose should be established.
This statement maps to Principle 2 in the ICMA Code and Principle 1 in the JFSA code.
Sustainable1 maintains written policies and procedures designed to ensure that its data analysis is thorough, and its methodologies are rigorous, consistently applied, and regularly reviewed. Data quality is considered as part of the Methodology and Model review and revision process which may address data inputs and dependencies, output metrics, methodology sensitivities, validation and monitoring findings, and whether proposed changes could affect methodology or model outputs and analytical results. Findings from data quality reviews, monitoring activities, validation processes, stakeholder feedback, issues, or complaints may inform Methodology and Model revisions where appropriate. Sustainable1 also regularly re-evaluates its quality processes and adjusts them in response to any issues identified and root cause analyses.
The Sustainable1 Data Quality team operating independently works to help ensure that the data underpinning our sustainability products is accurate, complete, timely and fit for purpose. The team conducts ongoing reviews of data collection processes and assesses the quality and integrity of data entering products, applies a standardized quality measurement framework with defined quality indicators, and expands automated controls across data inputs, methodologies and outputs so anomalies are detected early. Third-party data and external content used in our products are reviewed for quality and suitability.
For S&P Global ESG Scores:
- Sustainable1 applies a multi-layered approach to measure and optimize the quality of its input data for the creation of S&P Global ESG Scores (“Score Data”). This comprises data quality checking in several stages depending on data materiality and whether it is sourced through direct company engagement or from public records. Certain datasets will undergo two-stage quality checking in addition to further sample-checking.
- To ensure quality and objectivity of Score Data, Sustainable1 voluntarily appoints an independent third-party to conduct an external audit of the assessment process each year. The targeted Assurance statement can be found here.
Sustainable1 is undertaking several key initiatives to strengthen the collection and maintenance of high-quality data. These include introducing new processes and systems to modernize and centralize data collection, as well as expanding audits to verify and enhance existing data validation and error-checking controls. Sustainable1 is also increasing investment in AI technologies which, once implemented, are expected to reduce manual intervention and support ongoing improvements in data quality.
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Principle - Human Resources Development
Principle - Human Resources Development
Secure necessary professional human resources to ensure the quality of the evaluation and data provision services provided and assure they develop their own professional skills.
This statement maps to Principle 2 in the JFSA code.
Sustainable1 is committed to hiring sufficient skilled personnel with the appropriate balance of sustainability and financial knowledge to allow for efficient and smooth business operations.
Sustainable1 has adopted focused recruitment standards to attract and retain top talent and offers continuous learning and development opportunities to equip personnel with skills to further progress their competencies. Furthermore, there are key mandatory training requirements pertaining to Risk and Compliance that all Sustainable1 employees must complete.
Sustainable1 personnel have regular performance review meetings with managers and complete an annual full year performance assessment.
Principle - Ensuring Independence and Managing Conflicts of Interest
Establish effective policies so the organization can make decisions and appropriately address conflicts of interest that may arise. Identify activities and situations that could undermine the independence, objectivity, and neutrality of the business, and avoid potential conflicts of interest.
This statement maps to Principle 3 in the ICMA Code and Principle 3 in the JFSA code.
Sustainable1 has established a conflict-of-interest management framework designed to identify, manage, mitigate, and where appropriate, disclose conflicts of interest that could affect the independence, objectivity, or integrity of its ESG ratings. The public summary is available on our website. This framework is supported by:
- A clear separation between employees who analyze and develop S&P Global ESG Scores, and employees involved in commercial activities;
- Restrictions on employees to ensure that no personal interests' conflict with duties of independence and professional judgment; and
- Employee reporting lines and compensation arrangements that reinforce the exercise of independence and objectivity.
In the event there are consulting, advisory or other business relationships with scored entities, Sustainable1 employs appropriate measures to ensure that no such relationships will compromise its ability to provide independent and objective assessments on those entities.
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Principle - Ensuring Independence and Managing Conflicts of Interest
Principle - Ensuring Independence and Managing Conflicts of Interest
Establish effective policies so the organization can make decisions and appropriately address conflicts of interest that may arise. Identify activities and situations that could undermine the independence, objectivity, and neutrality of the business, and avoid potential conflicts of interest.
This statement maps to Principle 3 in the ICMA Code and Principle 3 in the JFSA code.
Sustainable1 has implemented several controls, including a Sustainable1 Divisional Independence and Objectivity Code policies, Sustainable1 Securities Disclosure policy, and Policy Role designations (collectively the “Policies”) to ensure all employees are independent and conflicts of interests are properly managed. In particular, the policies and controls drive the following:
compliance arrangements to enable actual or potential conflicts to be identified, managed, eliminated, and disclosed appropriately,
a clear separation between employees who analyze and develop S&P Global ESG Scores, and employees involved in commercial and marketing activities,
restrictions on employees to ensure that no personal interests (including securities holdings and outside business activities) conflict with duties of independence and objectivity towards clients,
employee reporting lines and compensation arrangements that reinforce the exercise of independence and objectivity.
In the event that there are consulting, advisory or other business relationships with scored entities, Sustainable1 employs appropriate measures to ensure that no such relationships will compromise its ability to provide independent and objective assessments on those entities.
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Principle - Ensuring Transparency
Principle - Ensuring Transparency
Ensuring transparency is an essential and prioritized issue, and the organization should publicly clarify their philosophy in providing services. Methodology and processes for formulating services should also be sufficiently disclosed.
This statement maps to Principle 4 in the ICMA Code and Principle 4 in the JFSA code.
Sustainable1 makes methodology information publicly available to support user understanding of the frameworks, processes, and key considerations underpinning its products and services. This information may include related rationales, formats, background information, and weights, as applicable. For Sustainable1, methodology information is available, and the framework and process for generating S&P Global ESG Scores is further described on its public website.
Sustainable1 also provides supporting documentation and contextual information, where relevant, to help users understand how methodologies are applied and how outputs should be interpreted. S&P Global ESG Scores are supported by documented audit trails, evidence, and rationale maintained within the designated IT systems in which the assessment is produced. Related public disclosures may include data availability, date of last update, score history, and industry comparatives.
Independent monitoring further supports transparency by assessing whether methodology information and related application practices provide users with sufficient insight into S&P Global analytical outputs.
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Principle - Confidentiality
Principle - Confidentiality
Establish policies and procedures to appropriately protect non-public information obtained during business.
This statement maps to Principle 5 in the ICMA Code and Principle 5 in the JFSA code.
Sustainable1 does not publish or disclose any non-public and/or confidential information received in connection with the development of its products, including S&P Global ESG Scores, unless such disclosure is required by law or regulation or with the prior consent of the disclosing entity. Accordingly, Sustainable1 has established operational procedures to (i) protect confidential information from fraud, theft, misuse, or inadvertent disclosure; (ii) allow effective cross-organizational collaboration without compromising the integrity of its products or putting the protection of any confidential information or intellectual property at undue risk; and (iii) ensure that access to systems is provided on a need-to-know basis only.
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Principle - Communication with Companies
Principle - Communication with Companies
Devise and improve the way the organization gathers information from companies so that the process becomes efficient for both service providers and companies and that necessary information can be sufficiently obtained. Appropriately respond when important or reasonable issues related to an information source are raised by companies subject to evaluation.
This statement maps to Principle 6 in the ICMA Code and Principle 6 in the JFSA code.
Companies engaging with Sustainable1 in the Corporate Sustainability Assessment process are provided comprehensive and timely information on the data collection period and the process.
Sustainable1 conducts webcasts and in-person workshops regularly to provide information on the Score Data, methodologies, and participation processes.
Sustainable1 has defined measures and official points of contact for companies to refer to questions or concerns about S&P Global ESG Scores or Score Data. Measures include processes to initiate, where appropriate, reviews of assigned scores prior to or after S&P Global ESG Score publication.
Sustainable1 engages with companies through established communication channels and, where required, complies with applicable pre-notification periods for rated entities before publication.