Author: Molly Porter

In October 2023, there was a noticeable uptick in ESG policy developments worldwide. The world’s first green bond standards were issued as a regulation in the European Union. Meanwhile, efforts to dilute the European Sustainability Reporting Standards (ESRS) were thwarted as the Members of European Parliament maintained that ESRS would be implemented without modifications, but introduced a delayed timeline for the adoption of sector-specific standards. Some questions remain however on proportionality of burden for small and medium-sized enterprises (SMEs) and revising the SME thresholds, given the backdrop of high inflation. Among other policy initiatives, the EU has also proposed a regulation that would prohibit goods made with forced labour.

In the Netherlands, the Dutch financial markets regulator has released guidelines to help financial institutions and pension providers accurately represent their products’ sustainability aspects. Shifting the focus to Switzerland, the Swiss Asset Management Association has introduced a voluntary stewardship code to promote stewardship activities and policies for sustainable value generation. Switzerland may also introduce a new sustainable fund labeling regime to prevent greenwashing.

In the United Kingdom, the creation of a Transition Plan Taskforce framework aligns with the IFRS S2 climate resilience reporting requirements while offering a broader spectrum of disclosure options. The UK is also seeking feedback from stakeholders on how to incorporate social factors into the occupational pension schemes industry.

Despite the enduring political debate on the value of ESG in the US, regulators are forging ahead with moderate policy action in this domain. The US Fed and other agencies have jointly finalized principles for climate risk management, while New York State considers mandatory employee data reporting to promote diversity and inclusion. Moving South, we observe Brazil’s pioneering move to adopt the ISSB standards in its regulatory framework. The country has laid out a roadmap to manage adoption and aims to attract local and global investment by enhancing transparency around sustainability matters.

Over to Asia Pacific, the Monetary Authority of Singapore unveiled transition planning guidelines to bolster climate resilience in the region and Australia proposed IFRS-aligned climate reporting standards, aiming to embed the international standards within a localised context. The high volume of policy initiatives is an unlikely ‘coincidence’ this close to COP28. Next month, we will find out what decisions will be taken by the global participants on mobilising climate finance at scale.

Europe

European Council adopts regulation to create an EU Green Bond Standard

 On 24^th October, the European Council took a significant step by adopting a new regulation to establish the EU Green Bond Standards. The regulation sets forth ‘uniform requirements’ for issuers of environmentally sustainable bonds that need to demonstrate funding of legitimate green projects that are aligned with the EU Taxonomy. It also includes rules to regulate external reviewers of European green bonds. EUGB provides a flexibility pocket of 15% for those activities and sectors that are not yet covered by the EU Taxonomy to ensure that this does not halt the initial use and progress of the standards. Overall, the regulation is designed to aid investor identification globally and enhance transparency in the green bond market. The final regulation will enter into force on November 12, 2024.  Read more

EU forges ahead with ESRS implementation despite political backlash

On 18^th October, the European Parliament rejected a motion put forth by MEPs to water down the European Sustainability Reporting Standards (ESRS). The ESRS is a key component of the Corporate Sustainability Reporting Directive (CSRD), which mandates around 50,000 companies to disclose their ESG performance. Meanwhile, the Council and Parliament have proposed adjusting size thresholds for companies to alleviate the reporting burden for SMEs.  The decision to postpone the adoption of sector-specific standards by two years, from 2024 to 2026, was also announced as part of the 2024 Commission Work Programme. The delay primarily affects the enforcement of sector-specific disclosures and extends to non-EU entities operating within the EU, with both facing a two-year delay in their respective reporting deadlines. The rationale behind this delay is to allow companies to concentrate on integrating the initial ESRS while giving the European Financial Reporting Advisory Group (EFRAG) time to develop comprehensive sector-specific standards.  Read more

EU set to ban products made with forced labour

The European Parliament is currently reviewing a proposed regulation that would ban products in the EU market that are made with forced labour. The regulation would establish a framework for investigating human rights violations across the supply chain. Once it is proven that a company has produced goods made with forced labor, the export and import of those products will be suspended at the EU’s borders and the company will also be forced to withdraw goods that have already entered the EU market. Furthermore, the Internal Market and International Trade committees are proposing that reintroduction of previously banned goods to the market would necessitate corrective actions. MEPs have called for the establishment of a list identifying high-risk regions and sectors, and in such cases the burden to prove compliance with international human rights standards would fall on companies.  Read more

Dutch Authority for Financial Markets (AFM) releases guidelines on sustainability claims

The AFM aims to contribute to more transparency regarding sustainability claims, allowing customers of financial institutions and members of pension providers to have a clearer understanding of the sustainability aspects of their products and whether these match their expectations. In the guidelines, AFM highlights that consumers increasingly rely on ‘generic information’ from providers such as marketing information and can therefore find discrepancies between the expectations and real-world choices. By using principles, explanation statements and examples, these guidelines provide insight on how to correctly represent sustainability claims in generic product information. The key principle emphasises maintaining the factual accuracy of sustainability claims. Market participants are also advised to ensure claims about products are substantiated, comprehensible and accessible to readers. Read more

Swiss Asset Management Association voluntary stewardship code for asset managers

In response to international developments and recommendations from the Federal Council, Switzerland is introducing a Stewardship Code directed at asset owners, asset managers, and service providers to encourage the integration of stewardship activities into their business models and investment processes. The Code contains a set of 9 principles for effective stewardship ranging from governance, commitment to active and informed voting, proactive engagement with investee entities, effective management of conflicts of interest as well as stewardship activities that promote sustainable outcomes.  Read more

Swiss Federal Department of Finance announces sustainable fund labeling rules to prevent greenwashing  

The Federal Department of Finance (FDF) announced that it will implement the Federal Council’s position on tackling greenwashing in the financial services sector by proposing a principles-based state regulation. In a position paper issued in December 2022, the Federal Council proposed that financial services providers with products labelled ‘sustainable’, ‘ESG’ or ‘green’ should provide clarity on sustainability objectives to clients and investors to avoid misleading them. Secondly, the Council recommended that providers describe their investment strategies and define KPIs to validate sustainability impact and set measurable targets. The final recommendation called for regularity in reporting sustainability and climate alignment progress and recommended that these reports should be subject to third-party verification. Based on the initial position, the FDF will submit a consultation draft to the Federal Council by the end of August 2024, with the possibility of industry self-regulation being considered as an alternative if it effectively aligns with the Federal Council’s objectives.  Read more

United Kingdom

UK Transition Plan Taskforce publishes sector-neutral Disclosure Framework for transition plan disclosures

The TPT has developed a sector neutral Disclosure Framework for best-practice transition plan disclosures, alongside implementation guidance and sector guidance. The TPT Disclosure Framework is designed to be available for voluntary and mandatory use internationally, purposefully supporting regulatory implementation in a manner consistent with reporting under the ISSB Standards and accommodating a net-zero or other climate ambition. It complements, and builds on, IFRS S2 climate resilience reporting requirements. For entities with a strategy for the management of climate-change related risks and low carbon business models, the TPT Disclosure Framework offers a broader spectrum of disclosure options. Read more

Guidance from the Taskforce on Social Factors considers social dimension in pension scheme investments

The UK Department for Work and Pensions’ Taskforce on Social Factors has initiated a consultation on guidance for incorporating social factors into pension investment decisions, emphasizing the need for trustees to assess both ‘material’ and ‘salient’ social risks and opportunities. With over 30 recommendations, the guidance encourages asset managers to integrate social factors into their stewardship policy and investment strategies. It includes a materiality assessment framework and provides examples of best practice such as a ‘clear voting policy’ and directly engaging with top performing companies across the ‘S’ dimension.  The taskforce hopes to formalise these guidelines by early 2024 for UK pension scheme trustees.  Read more

UK launches consultation on Scope 3 Emissions reporting landscape

The UK government is soliciting input on the costs, benefits, and practical implications of reporting Scope 3 greenhouse gas emissions, considering whether to incorporate the ISSB standards in the Sustainability Disclosure Standards (SDS) regulation. This call for evidence also covers the existing Streamlined Energy and Carbon Reporting framework and its voluntary Scope 3 disclosures, with the Financial Conduct Authority set to consult on rule changes for referring to UK-endorsed standards by early 2024, and the potential introduction of new rules for listed companies for accounting periods starting in 2025. Read more

Green Agreements Guidance provides clarity on sustainability-related business agreements

In response to the growing importance of environmental sustainability, the CMA has taken a significant step by issuing revised guidelines for businesses. These guidelines, which pertain to Chapter I provisions of the Competition Act 1998, shed light on how companies within the same supply chain can collaborate on sustainability initiatives. Following extensive consultations with industry stakeholders, these guidelines provide clarity and practical insights, aiming to encourage responsible competition in the pursuit of environmental goals. Read more

United States

Board of Governors of the Fed finalises principles for climate risk management for financial institutions

The Federal Reserve, The Federal Deposit Insurance Corporation, and the Office of the Comptroller of Currency have issued guidance in the form of “Principles for Climate-Related Financial Risk Management for Large Financial Institutions,” aimed at helping these institutions effectively manage financial risks associated with climate change across different areas and risk categories. This guidance outlines key principles related to governance, policies, strategic planning, risk management, data reporting, and scenario analysis, offering a comprehensive framework for addressing climate-related financial risks. Read more

New York State Assembly bill to mandate employee data regarding gender, race, and ethnicity

The bill, if enacted, would require certain companies and corporations in the state of New York to report data regarding the gender, race, and ethnicity of their employees. This data would need to be filed with the Secretary of State and subsequently published on the Secretary of State’s official website, enhancing transparency and accountability in terms of diversity and inclusion in the workforce.  Read more

South America

Brazil announces regulatory framework to adopt ISSB-aligned standards

The Brazilian Securities Commission (CVM) introduced Rule No. 193 on October 20, 2023, implementing the International Sustainability Standards Board’s (ISSB) IFRS S1 and IFRS S2 frameworks for sustainability reporting. This rule mandates publicly traded companies to provide comprehensive information on governance, risk management, strategy, and goals and metrics related to sustainability, with a specific focus on climate-related information. Brazil is the first country to commit to adopting these standards, aligning with international efforts to harmonize sustainability data disclosure. Mandatory adoption begins for fiscal years starting on or after January 1, 2026, while voluntary adoption can commence as early as January 1, 2024.  Read more

Asia Pacific

Monetary Authority of Singapore launches consultation papers on transition planning

The Monetary Authority of Singapore (MAS) has released a set of Consultation Papers outlining Transition Planning (TP) Guidelines for banks, insurers, and asset managers to enhance climate resilience and facilitate climate mitigation and adaptation efforts, focusing on internal strategic planning, risk management, governance, data, implementation, and disclosure. MAS expects financial institutions to engage and steward customers and investee companies, take a multi-year approach to assess climate-related risks, address environmental risks and provide comprehensive climate-related risk disclosures.

Australia announces proposed IFRS-climate reporting standards

The Australian Sustainability Reporting Standards (ASRS), including draft ASRS 1 and ASRS 2, are developed with the ISSB standards as a foundation. The Australian Accounting Standards Board have used the ISSB’s IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures as a baseline, however, there may be modifications or adaptations to the ISSB standards to meet the specific needs of Australian stakeholders and the legislative and regulatory requirements in Australia. The ASRS aim to provide a framework for sustainability reporting in Australia, with a focus on climate-related financial disclosures, however there is a critical balance to be maintained between ensuring interoperability with ISSB standards while accommodating local considerations and requirements. Read more

Other News & Resources

• EFRAG provides resources for implementation of ESRS including Excel workbook with draft list of datapoints and guidance. Read more
• EFRAG launches ESRS Q&A Platform. Read more
• ICMA launches report on Market integrity and greenwashing risks in sustainable finances. Read more
• Swiss Federal Council launches Climate Scores to assess climate resilience of portfolios based on selected indicators and minimum criteria for transition to net zero. Read more
• Securities and Futures Commission announces support for voluntary code of conduct of ESG ratings and data providers in Hong Kong. Read more
• Finance for Biodiversity Foundation publishes guidelines on unlocking the biodiversity-climate nexus. Read more
• ICMA launches report on Market integrity and greenwashing risks in sustainable finances. Read more

*ESG Book manages the world’s largest repository of sustainability reporting provisions with over 2,400 regulations across more than 80 jurisdictions globally. If there is a recent ESG regulatory development we have missed, we would like to hear from you and invite you to contribute below.

Click here to access the ESG Regulatory Provisions Contributor Form

California is not waiting around for nationwide corporate emissions disclosure rules, having moved ahead to adopt laws requiring companies to disclose climate-related data. Even though this is state legislation, the impact of these new climate disclosure rules goes well beyond California’s borders. As we explain in this new article, we see California’s disclosure rules having ‘long arms’ in three key ways:

1. They set the first U.S. corporate climate disclosure standard for public AND private companies.
2. By requiring Scope 3 emissions disclosure, California’s rules can reach every part of a company’s value chain.
3. Many US companies headquartered outside California can fall under its scope, both U.S. as well as foreign companies.

As ESG Book’s Isabel Verkes explains, these new disclosure rules have far-reaching consequences for transparency on corporate climate-related information. See the article here.

The European Commission initiated two consultations on 14 September 2023 to gather feedback on the Sustainable Finance Disclosure Regulation (SFDR). The goal is to assess SFDR’s implementation progress since March 2021 and find ways to enhance its effectiveness against greenwashing. The consultations target general stakeholders and experts in sustainable finance. They focus on improving clarity, usefulness of disclosures, costs, data, and alignment with other EU sustainable finance laws. Below is our summary of the key takeaways, including a useful comparison table between SFDR and other international fund labelling regimes such as the UK SDR, the US SEC and India’s SEBI. 

Download the article here.

In the dynamic landscape of global ESG policies, September 2023 witnessed pivotal developments across continents. In Europe, the European Commission proposed a comprehensive overhaul of SFDR categories, aiming to prevent mislabeling and align practices with the UK Financial Conduct Authority. Concurrently, the EU Parliament pursued stringent regulations to curb greenwashing and enhance consumer protection, pending final approval. Notably, France emerged as a trailblazer by enshrining CSRD into law, meeting stringent reporting deadlines. Shifting focus to the United Kingdom, regulatory bodies unveiled measures fostering diversity and inclusion within the financial sector, emphasizing non-financial misconduct considerations and transparent reporting. In the United States, the SEC adopted a fund labeling rule to deter greenwashing, ensuring transparency for investors navigating sustainable investment options. Meanwhile, Asia Pacific saw the Hong Kong Monetary Authority releasing principles guiding banks toward a net-zero economy, while Indonesia’s consideration of coal for green financing raised environmental concerns. Additionally, global collaborations, such as TNFD’s final recommendations and ISO-UNDP initiatives, underscored the international drive for standardized sustainable finance practices.

Europe

European Commission proposes overhaul of SFDR product categories

In a targeted consultation, the EU Commission has proposed overhauling product categories established under SFDR. The Commission will consider outlining “precise criteria” and formal product categories for Article 8 “light green” and Article 9 “dark green” funds to prevent the mislabeling of funds. This comes after a wave of funds were downgraded from Article 9 to Article 8 status, while Article 6 funds upgraded to Article 8 status. Market participants have expressed concern over the possibility of Article 8 and 9 being scrapped in lieu of a new categorization system. The consultation will also examine the relevance of key concepts embedded within the SFDR framework.  On the positive side, the proposed changes to Article 8 and 9 criteria in SFDR would provide clearer guidelines and align with market practices, thereby reducing mislabeling and encouraging transparent sustainability disclosure. Moreover, the inclusion of Article 6 funds in the disclosure requirements would help investors uncover the least sustainable assets. Under the new SFDR category proposals, the regulation would align with the UK Financial Conduct Authority (FCA) by introducing new types of investment categories, including those with quantifiable targets, measurable sustainable solutions and thematic investments. Introducing new categories, on the other hand, may lead to transitional challenges and uncertainties for asset managers and financial institutions. A new system could cause fragmentation, increase compliance costs and potentially stifle innovation due to overcaution. However, it seems the demand for consistent and reliable sustainability data is not going anywhere and will likely increase for those products making sustainability claims. Read more

EU Parliament reaches provisional agreement to ban greenwashing and improve consumer product information

The EU is set to implement rules that will crack down on misleading marketing practices including generic environmental claims without proof of ‘recognised excellent environmental performance’. This will prohibit product communication for goods designed to limit durability, claims based on emissions offsetting and sustainability labels without approved certification schemes. Additionally, the agreement mandates the introduction of a harmonized label to highlight products with extended guarantees. The new rules would aim to protect consumers from deceptive practices, promote product durability, and ensure transparency in advertising. The agreement is pending final approval from both the Parliament and the Council, with a vote expected in November, followed by a 24-month period for member states to implement the new rules. Read more

France to enshrine CSRD into law

France has become the first EU member state to submit a draft of the national law that will impose CSRD reporting. CSRD will supersede the existing Non-Financial Reporting Directive (NFRD), with reporting taking place in three phases. In the first reporting phase, large companies with over 500 employees already subject to NFRD must begin reporting in 2025 on their 2024 financial year. All member countries are expected to codify the directive into national law and adopt the necessary regulatory provisions to support cross-border alignment of sustainability reporting rules. Read more

United Kingdom

FCA and PRA introduce diversity and inclusion measures for financial services sector

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have launched consultations in parallel on regulatory measures aimed at promoting diversity and inclusion (D&I) within the financial sector. These proposals include integrating non-financial misconduct considerations into staff assessments, introducing reporting requirements for D&I data, mandating D&I strategies, setting diversity targets, and recognizing a lack of D&I as a non-financial risk. Smaller firms with fewer than 251 employees would face reduced regulatory burdens, while the overarching goal of both measures is to foster healthier firm cultures, reduce groupthink, unlock new talent, and better address diverse consumer needs. The framework seeks to establish minimum standards and enhance transparency without imposing sector-wide targets. These regulatory proposals represent a significant step toward addressing diversity and inclusion in the financial sector. By requiring firms to develop and publish D&I strategies and set targets for underrepresented groups, they encourage a more inclusive corporate culture and board governance. The emphasis on individual accountability and monitoring, as well as reporting and disclosure, aims to ensure ongoing progress.  Read more

United States

SEC adopts fund labelling rule to prevent greenwashing

The U.S. Securities and Exchange Commission (SEC) has adopted amendments to the ‘Names Rule,’ a fund labeling regulation that requires 80% of holdings to be invested in accordance with the fund’s suggested investment focus. Funds that deem themselves ‘ESG,’ ‘sustainable’ or ‘green’ must identify securities included in the 80% basket. The rule will further transparency, enhance data comparability and help investors differentiate between investment strategies. Given the investment industry’s demand for quantitative data, the SEC has also provided a standardized methodology for reporting emissions metrics. With increasing scrutiny of ESG labels, regulators are equipping investors with the tools to better navigate the sustainable investment landscape and avoid the pitfalls of greenwashing. The SEC is no exception, as the latest rule sets a disclosure obligation for funds to substantiate effective ESG strategies. As an alternative to overwrought regulation, this clearly outlines investment conditions for ESG funds and prescribes a strategy-specific approach to disclosures. The regulation will have profound implications for asset managers who are keen to invest in more funds that are environmentally and socially conscious. Read more

US Treasury releases principles for net-zero banking

The U.S. Department of the Treasury has unveiled voluntary Principles for Net-Zero Financing & Investment aiming to guide financial institutions with net-zero commitments. The voluntary Principles are largely informed by private sector financial institutions that are effectively and credibly mobilising capital to mitigate the effects of climate change, support green transition and ultimately deliver net-zero commitments. The Treasury has compiled best practices and initiated engagement with stakeholders to develop consistent practices in net-zero financing and investment while addressing climate change’s impacts. Additionally, GFANZ has announced that over 50 US financial institutions will publish net-zero transition plans using common frameworks. The voluntary principles emphasize the importance of clear transition plans aligned with limiting global temperature increases to 1.5 degree Celsius, along with support for clients and portfolio companies in achieving net-zero commitments.  Read more

California emissions disclosure bill set to become law

California’s Climate Corporate Accountability Act (CA SB 253) has been approved by the California State Assembly and State Senate and is set to become law once it is approved by Governor Gavin Newsom. The bill would require large US-based organizations operating in California, generating over $1 billion in annual revenue (an estimated 5,400 companies) to disclose their GHG emissions, including Scope 3 emissions, in accordance with the GHG Protocol. Tech giants including Apple and Google voiced their support for the bill as a key measure to “encourage others to speed up their efforts towards carbon neutrality”. CA SB3 is part of the Climate Accountability Package introduced by California lawmakers in January 2023. The package also includes a bill (CA SB 261), which would require corporations with over $500 million in annual revenue doing business in California to submit annual climate-related financial risk reports (TCFD disclosures) by 2026. Meanwhile, climate policy action at the federal level remains static at best as federal agencies face pushback from stakeholders on both sides of the political aisle. Read more

Asia Pacific

HKMA releases principles to help banks plan for net-zero transition

The Hong Kong Monetary Authority (HKMA) has issued high-level principles for transitioning to a net-zero economy to assist banks in maintaining financial stability. In 2022, HKMA introduced a two-year plan to integrate climate risk into its banking supervision, including reviewing the “greenness” assessment framework. International organizations and the Basel Committee on Banking Supervision (BCBS) have also focused on transition planning. The principles include setting clear objectives and targets aligned with net-zero goals, establishing a robust governance framework, devising appropriate initiatives, engaging with clients, performing reviews and updates, and maintaining transparency. These principles may evolve based on international developments, and HKMA will continue to engage with the industry and conduct a survey on transition planning practices in 2023. Read more

Indonesia considers coal for green taxonomy

Indonesia’s financial regulator is considering labeling coal-fired power plants that supply electricity to electric vehicle (EV) battery manufacturers as eligible for green financing, eliciting criticism from environmentalists. The country’s “green taxonomy” is being revised to align with ASEAN Taxonomy, which includes funding for retiring coal power plants and potentially extending green financing to power plants used by industries that make sustainable end-products such as electric batteries. Analysts at the Institute for Energy Economics and Financial Analysis (IEEFA) argue that this move contradicts scientific evidence and may place Indonesia at odds with global green finance standards, despite its pledge to reach net-zero emissions by 2060.  Read more

Other News & Resources

• TNFD releases final recommendations. Read more
• ISO and UNDP to develop global standards for SDG reporting. Read more
• GFANZ launches consultation on transition finance. Read more
• NGFS publishes guidance following an increase in climate litigation. Read more

*ESG Book manages the world’s largest repository of sustainability reporting provisions with over 2,400 regulations across more than 80 jurisdictions globally. If there is a recent ESG regulatory development we have missed, we would like to hear from you and invite you to contribute below.
Click here to access the ESG Regulatory Provisions Contributor Form

The window in which we can keep average global warming to within 1.5 degrees of the pre-industrial era is closing fast. The only way in which we can achieve this is by dramatically reducing global greenhouse gas emissions to net-zero by the mid-21st century. To have even a chance of reaching this objective, the energy sector needs to lead a seismic shift in how the world is powered. If this one sector fails, climate breakdown will be all but inevitable.

In this article, we examine the latest update to the Net Zero Roadmap published by the International Energy Agency to assess the current and likely future performance of the energy sector.

Download the article here

This month’s policy digest highlights notable sustainability-related policy developments in Europe and Asia-Pacific. At a global level, external assurance on sustainability reporting was addressed by the International Auditing and Assurance Standards Board (IAASB) in a new exposure draft for a proposed global sustainability assurance standard. On 17th August 2023, the EU took steps towards mandating importers of goods under the Carbon Border Adjustment Mechanism (CBAM) to provide emissions data during the transitional phase of the rule’s implementation. EFRAG released a Materiality Assessment Implementation Draft Guidance, outlining guidelines for companies seeking clarity on materiality assessment to support alignment with the European Sustainability Reporting Standards (ESRS).

Down under, the Australian Auditing and Assurance Standards Board (AUAASB) released a consultation paper to study the implications of the Proposed ISSA global sustainability assurance standard addressing diverse sustainability topics and frameworks, including IFRS Sustainability Disclosure Standards S1 and S2. In China, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) released an ESG reporting template and flexible framework with mandatory and voluntary reporting indicators for state-owned enterprises. Despite the lower volume of global policy developments this month, there remains an embedded policy objective to introduce and implement a wide range of measures supporting a sustainable transition.

Global

IAASB introduces global sustainability assurance standards

In an effort to increase transparency from an investor-focused lens and improve reliability of sustainability data across different disclosures, the IAASB recently proposed the International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. Once adopted, the standard will apply to sustainability information furnished across any sustainability topic and framework, including the recently released IFRS Sustainability Disclosure Standards S1 and S2. In addition, the proposed ‘principles-based standard’ may be used for limited and reasonable assurance engagements. Interested stakeholders are invited to provide feedback until December 1, 2023 with the final standard slated to be released by the end of 2024. Read more

Europe

EU Enforces Emissions Reporting for New Import Carbon Tax

The European Commission has adopted the ‘Implementing Regulation’ which shall impose transitional reporting requirements on importers of goods covered under the Carbon Border Adjustment Mechanism (CBAM). As a supplement to the rule, the Commission has also released detailed guidelines for the transitional phase of the Carbon Border Adjustment Mechanism (CBAM), set to take effect from October 1, 2023, until the close of 2025. First reporting is expected by January 2024. Importers must provide emissions data, including origin, production facility details, and direct and indirect emissions. CBAM will apply initially to products like iron, steel, cement, and expand to downstream goods, with importers specifically being responsible for reporting until 2026. The CBAM was established last year to prevent the risk of carbon leakage, taking aim at companies outsourcing carbon emissions abroad, where it may be easier to eschew manufacturing processes oversight. Read more

EFRAG releases Materiality Assessment Implementation Draft Guidance

EFRAG has created guidelines for the assessment of material impacts, risks or opportunities for companies adhering to European Sustainability Reporting Standards (ESRS) within the Corporate Sustainability Reporting Directive (CSRD). Based on EFRAG’s recommendations, reporting should cover policies, actions, targets, and metrics, allowing non-material metrics to be omitted. The process includes stakeholder engagement, compiling sustainability factors, and finalizing material matters. Transparency is key, with disclosure of assessment processes, impact-strategy links, and ESRS mandates. Overall, the guidance provides that disclosing companies must aim for comprehensive alignment with sustainable practices beyond regulatory compliance. Read more

Asia Pacific

AUAASB releases consultation paper on Proposed ISSA 5000 General Requirements for Sustainability Assurance Engagements

Australia’s auditing and assurance regulator has called for feedback on the IAASB’s proposed global sustainability assurance standard. This standard aims to bolster confidence in sustainability information and a diverse range of sustainability topics and frameworks, including IFRS Sustainability Disclosure Standards S1 and S2, while addressing limited and reasonable assurance. The AUAASB has highlighted in its consultation that these assurance standards may be used by both professional accountants and non-accountant assurance practitioners. Read more

SASAC releases ESG reporting template to state-owned enterprises

In China, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) internally distributed its ESG reporting template and overarching framework for state-owned enterprises to report on sustainability-related information. The framework is organized into three tiers, spanning from 14 tier 1 indicators to 132 tier 3 indicators, encompassing both mandatory and recommended metrics. Read more

Other News & Resources

• IMF releases paper on Fossil Fuel Subsidies Data: 2023 update. Read more
• US Treasury appoints new Climate Counselor. Read more
• Science-Based Targets Initiative (SBTi) report reveals 87% surge in corporate climate action in 2022. Read more
• Institute for Energy Economics and Financial Analysis finds credit ratings are underplaying climate-related risks. Read more

Have we missed anything?

*ESG Book manages the world’s largest repository of sustainability reporting provisions with over 2,400 regulations across more than 80 jurisdictions globally. If there is a recent ESG regulatory development we have missed, we would like to hear from you and invite you to contribute below.
Access the ESG Regulatory Provisions Contributor Form.

Global sustainability reporting is entering a promising era of alignment following the issuance of the IFRS S1 and S2 standards last month. The IFRS Foundation has since announced that it will double its responsibilities by inheriting oversight functions for the Task Force on Climate-related Financial Disclosures, starting 2024. This month, the newly introduced IFRS S1 and S2 standards have also formally been endorsed by the International Organization of Securities Commissions (IOSCO), encouraging comparability of current reporting procedures and targeting better alignment across corporate disclosures.
Meanwhile in Europe, MEPs passed the Nature Restoration Law that would mandate Member States to restore certain ecosystems and prevent biodiversity loss. On the climate front, France became the first country to adopt a mandatory ‘Say on Climate’ law requiring publicly traded companies to seek shareholder approval on their climate plans. This approach empowers investors to play a more active role in steering companies towards climate-friendly practices and achieving net-zero goals.
In contrast to the European Union, regulation in the UK came to a standstill as the Financial Conduct Authority announced further delay in releasing sustainability disclosure rules (SDRs). Policymakers in the UK are facing pressure to catch up with other jurisdictions and enhance policy momentum to ensure the country remains competitive in the global push for sustainable reporting and climate action.
Down under, Australia’s competition regulator released guidelines to prevent greenwashing and help consumers make informed choices about the products they purchase for sustainability reasons. Also in the region, Singapore emerged as the first champion of the ISSB standards, proposing mandatory ISSB-aligned climate reporting for all listed companies and large non-listed companies. In India, shortly after the release of the Business Responsibility and Sustainability Reporting  (BRSR) Core Framework, the Securities and Exchange Board of India (SEBI) launched ESG themed sub-categories for equity schemes. Regulators in Thailand also made progress with the adoption of the Thai Green Taxonomy. This marks an important step in the country’s efforts to achieve decarbonization and mitigate the effects of climate change.
Worldwide, there is growing support for the harmonization of sustainability policy and sustainability standards. There is hope that the right regulatory framework adapted in localized contexts would underscore the significance of reconciling economic, environmental and social objectives.

Global
IOSCO endorses the ISSB Standards

Global securities regulators represented by the International Organization of Securities Commissions (IOSCO) have formally embraced the International Sustainability Standards Board’s (ISSB) climate-disclosure standards with a decision issued on 25 July 2023. After an 18-month consultation process, IOSCO endorsed the ISSB’s final sustainability disclosure standards and is urging regulators worldwide to consider adopting them for consistent and comparable climate-related and sustainability disclosures. The IOSCO’s endorsement is seen as a crucial step in advancing climate-risk disclosure for investors, and the Canadian Securities Administrators (CSA) have already expressed their intention to adopt the ISSB standards with appropriate modifications. The International Financial Reporting Standards Foundation will also provide guidance on implementing the ISSB standards by the end of the year. Read more

ISSB Consults on Digital IFRS Sustainability Disclosure Taxonomy
On 27 July 2023, the ISSB released the Proposed IFRS Sustainability Disclosure Taxonomy for public comment, aiming to facilitate structured digital reporting of sustainability-related financial information aligned with IFRS S1 and IFRS S2. The goal is to improve global accessibility and comparability of sustainability data for investors. Feedback is sought until 26 September, with the final taxonomy expected in early 2024. The ISSB aims to simplify information consumption for investors and explore interoperability with other sustainability requirements.Read more

IFRS to take over TCFD monitoring from 2024
The Financial Stability Board (FSB) has requested the IFRS Foundation to assume responsibility for monitoring companies’ climate-related disclosures, taking over from the Task Force on Climate-related Financial Disclosures (TCFD). This decision comes after the publication of the ISSB Standards—IFRS S1 and IFRS S2—which fully incorporate the TCFD’s recommendations. The ISSB aims to facilitate the effective implementation of these standards globally, ensuring widespread use of high-quality sustainability-related disclosures. Starting in 2024, the IFRS Foundation will oversee this monitoring as the ISSB Standards become applicable worldwide. Read more

Europe

European Parliament passes Nature Restoration Law

The EU’s new Nature Restoration Law, passed by the European Parliament on 12 July 2023, aims to enhance biodiversity and climate action. It seeks to ensure a habitable environment for current and future generations, where land and seas can continue to provide essential goods and services for our lives and economies. The law aligns with the EU biodiversity strategy for 2030, recognizing that climate action involves both reducing greenhouse gas emissions and protecting nature. The Nature Restoration Law will build on the EU LIFE program’s success, which has funded numerous environmental protection and climate action projects since 1992. As the region faces alarming environmental decline, with more than 80% of habitats in poor condition, the law emphasizes the restoration of wetlands, rivers, forests, grasslands, marine ecosystems, and the species they support. Members of the EU Parliament (MEPs) highlighted ecosystem restoration as vital to combat climate change and biodiversity loss, without requiring new protected areas or obstructing renewable energy projects that serve the public interest. Read more

EBA seeks input on draft templates for Fit-for-55 climate risk scenario analysis

The European Banking Authority (EBA) has initiated a public consultation on draft templates to collect climate-related data from EU banks for the one-off Fit-for-55 climate risk scenario analysis. The consultation, which includes template guidance, aims to gather information on credit risk, market risk, and real estate risk. Banks are required to report aggregated and counterparty level data as of December 2022. The consultation process is open until 11 October 2023, and a public hearing is scheduled for 28 September 2023. After the consultation, data collection will begin in November, involving 70 banks. The analysis is expected to commence by the end of 2023, with results anticipated to be published by Q1 2025. Read more

France approves mandatory Say on Climate Law

The new legislation, which includes the proposals put forth by the French financial regulator AMF’s commission on climate and sustainable finance, mandates that publicly traded companies must present their climate strategies to shareholders for approval every three years through an advisory vote. Additionally, there will be an annual vote on the implementation of the strategies each year. The terms governing the publication of the annual report will be determined by the French council of state, which serves as the government’s advisory body for bill preparation, ordinances, and certain decrees. The French SIF has proposed specific requirements for climate plans this year, encompassing absolute scopes 1, 2, and 3 emissions in the medium- and long-term, along with detailed actions to attain the targets. This includes providing clarity on the allocation of capital expenditure due to the insufficient climate strategies observed in some companies.Read more

United Kingdom

FCA postpones rollout of sustainability disclosure rules

In the UK, policymakers announced further delay in establishing ESG disclosure rules for issuers and investors. The UK Financial Conduct Authority (FCA) postponed the publication of its Policy Statement on Sustainable Disclosure Requirements (SDRs) and investment labels consultation to Q3 2023, resulting in adjusted effective dates. The FCA initiated the consultation due to concerns about firms making misleading sustainability-related claims about their investment products. The proposed labels aim to increase transparency and trust for consumers seeking sustainable investment products. The delay allows the FCA time to study the regulatory burden imposed on firms by the proposed SDRs. This assessment period would also provide asset managers ample time to prepare and assess the implications of the SDRs if implemented and consider how these rules align with other jurisdictional regimes, such as the EU’s Taxonomy Regulation and Sustainable Finance Disclosure Regulation (SFDR). Read more

Asia pacific

Australia combats greenwashing with new sustainability claims rule

This month, the Australian Competition and Consumer Commission (ACCC) released draft guidance on environmental and sustainability claims to promote transparency and protect consumer rights. The draft guidance outlines the responsibilities under the Australian Consumer Law (ACL) that businesses must adhere to when making green claims. The key objective of these guidelines is to promote accuracy and transparency among businesses that make sustainability claims and propel them to provide consumers with clear, evidence-based information about their environmental performance. Another significant objective is to reduce instances of greenwashing. By providing consumers with reliable information, the guidance seeks to empower them to make more informed decisions when considering environmental or sustainability factors in their purchasing choices.Read more

Singapore set to introduce mandatory climate reporting standards aligned with ISSB for all listed companies
Singapore’s Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo) have launched a public consultation on Singapore Reporting Advisory Committee’s (SRAC) recommendations to advance climate reporting in Singapore, running from July 6 to September 30, 2023. The two regulatory bodies have proposed mandatory climate reporting for all listed Issuers from FY2025 and for large non-listed companies from FY2027. External assurance on emissions will be required for listed issuers from FY2027 and large non-listed companies from FY2029. The SRAC’s recommendations aim to maintain Singapore’s position as a hub for global finance while contributing to the sustainable development goals of the Singapore Green Plan 2030. If adopted, Singapore would be the first country in the region to prescribe standards aligned with ISSB requirements for reporting. Read more

Securities and Exchange Board of India launches new ESG mutual fund scheme

Indian securities regulator SEBI has recently made significant changes to the investment landscape by introducing a new sub-category for ESG investments under the ESG mutual fund scheme. ESG-focused schemes can now be launched with various strategies like exclusion, integration, positive screening, impact investing, sustainable objectives, and transition-related investments. However, mutual fund houses can only launch one ESG scheme for now. To ensure the credibility of these schemes, SEBI mandates that at least 80% of the scheme’s assets must be invested in equity and equity-related instruments based on its chosen ESG strategy. Furthermore, a minimum of 65% of the assets should be invested in listed entities with assured Business Responsibility and Sustainability Reporting (BRSR) Core, while the remaining assets can be invested in companies with BRSR disclosures. These measures will be implemented from October 1, 2024, and are expected to drive more investment in transition activities to support a greener future. Read more

Thailand launches Green Taxonomy
After much deliberation, Thailand adopted a Green Taxonomy on July 5th emphasizing the importance of embedding economic activities in climate-related objectives. Although Phase 1 of the taxonomy currently covers only the energy and transportation sectors, together, they account for up to two-thirds of the country’s total emissions. The taxonomy is expected to expand to other key sectors in the future, encompassing up to 95% of the country’s emission-relevant activities. Similar to the ASEAN Taxonomy’s traffic light system, Thailand’s Taxonomy includes green and amber categories, facilitating the upgrade of existing non-green activities in line with the Paris Agreement climate mitigation objectives. The Taxonomy showcases a conditional acceptance of a regional classification system with Thai-specific criteria aligned with the country’s decarbonization trajectory. Read more

Other News & Resources

• IRSG, ICMA launch consultation on Draft Code of Conduct for ESG Ratings and Data Product Providers. Read more
• ESMA publishes expectations on sustainability disclosures in prospectuses.Read more
• Provisional agreement reached on reviewing AIFMD and UCITS. Read more
• Japan’s Financial Services Agency (FSA) introduces draft guidelines for impact investing. Read more

Have we missed anything?
ESG Book manages the world’s largest repository of sustainability reporting provisions with over 2,400 regulations across 80 jurisdictions globally. If there is a recent ESG regulatory development we have missed, we would like to hear from you and invite you to contribute below.
Click here to access the ESG Regulatory Provisions Contributor Form