International Organization of Securities Commissions issues final report on applying benchmark principles to ESG indices used as benchmarks

The International Organization of Securities Commissions published a final report by its Sustainable Finance Taskforce assessing how the IOSCO Principles for Financial Benchmarks apply to ESG indices that are used as benchmarks. The report finds the principles are broadly applicable and can serve as a foundation for ESG benchmarks, but calls for proportional application and supplemental considerations to reflect the bespoke, qualitative and forward-looking nature of ESG data and methodologies and associated greenwashing vulnerabilities. The analysis is structured around governance, quality and integrity, methodology and accountability. It highlights expectations and considerations for ESG benchmark administrators, including stronger oversight of qualitative and forward-looking ESG inputs and evolving standards, oversight committees with sufficient ESG expertise, enhanced conflict-of-interest controls and disclosures where index providers also provide ESG ratings or have commercial links to constituents, and clearer transparency on benchmark objectives, data sources, data limitations and coverage, estimation methods, and when expert judgement is used. The report also points to the need for more frequent reviews, greater advance notice and rationale for methodology changes, transition or cessation planning, and ESG-specific complaint handling, audit protocols and audit trails that capture ESG-related decisions and methodological overrides. IOSCO’s work draws on a survey of 42 member jurisdictions and input from its Affiliate Members Consultative Committee, and notes that ESG-benchmark-specific disclosure regimes are limited to a few jurisdictions, with the European Union’s benchmark regime narrowing in scope from 1 January 2026 while EU Climate Transition Benchmarks and EU Paris-Aligned Benchmarks remain in full scope as critical benchmarks.