Category: Blog

Following a long and protracted run up to sustainability reporting deadlines, standard-setting bodies and regulators alike are introducing clarifications and phasing in implementation to ensure proportionality of compliance burden. Against this backdrop, the ISSB announced a relief measure that would place emphasis on climate-related disclosures in the first year of reporting. At the same time, the European Commission is creating supplementary criteria to the Taxonomy regulation to encourage alignment of economic activities with environmental objectives beyond climate change.  Furthermore, the SFDR is undergoing revision, to expand the list of principal adverse impacts (PAIs) and set decarbonization targets for financial products. In furtherance of supply chain oversight, the legal affairs committee of the European Parliament approved the draft EU Corporate Sustainability Due Diligence Directive. In Germany, financial regulator BaFin is promoting investor-led engagement in corporate sustainability initiatives.
Climate concerns are soaring in the UK, as the government develops its Green Finance Strategy to support nature recovery. The UK Government is also soliciting feedback on a carbon border adjustment mechanism to encourage decarbonization across various industries. Recognizing the critical role of the banks in transition, the US Fed has shared analysis of climate risk in the financial sector.
In Asia Pacific, the HKEX is taking steps to improve ESG reporting, with a focus on climate-related reporting. Conscious of increased policy interventions worldwide, the Australian government is pushing for measures to combat greenwashing, including a sustainable finance taxonomy. Currently, the ASEAN Taxonomy Board is also releasing a new version of its taxonomy to standardize sustainable asset categorization and reinforce nationally determined contributions (NDCs). Meanwhile, the Reserve Bank of India is introducing a framework for green deposits to encourage investments in sustainable initiatives.
Global sustainability standards and regulations are reaching a stage of maturity, suggesting a new focus beyond enhanced disclosure quality to indicator comprehension and use.  Once standards are set and accepted, there emerges the challenge of enabling organizations to utilize the appropriate tools for measuring progress in specialised contexts.

ISSB Sustainability and Climate Reporting Standards update

On 4th April, the International Sustainability Standards Board (ISSB) announced transitional relief for companies adopting the new S1 and S2 disclosure standards, expected to be released in Q2 2023. In the first year of reporting, companies will only need to prioritize climate-related disclosures, and are not expected to disclose sustainability-related risks and opportunities beyond climate or Scope 3 greenhouse gas emissions. This is aimed at allowing companies to familiarize themselves with the new standards and meet baseline reporting standards, regardless of their current disclosure practices. Next month, ISSB is expected to launch a consultation on its future priorities for standard-setting, including biodiversity, human capital, human rights, and integration in reporting. Read more

Europe

Call for feedback on EU Taxonomy draft delegated acts with criteria for four remaining environmental objectives

On 5th April, the European Commission launched a consultation on new EU taxonomy criteria for economic activities that contribute to non-climate environmental objectives such as sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. The draft Delegated Act is based on the recommendations of the Platform on Sustainable Finance and prioritizes economic activities that can make a substantial contribution to the environmental objectives. The draft Act also amends the Taxonomy Disclosures Delegated Act and introduces limited technical amendments to improve the implementation of the Taxonomy Climate Delegated Act. The Taxonomy Climate Delegated Act has established technical screening criteria for climate change mitigation and adaptation, but adaptation criteria for the activities included in the Taxonomy Environmental Delegated Act will be developed in the future. The consultation is open until 3rd May 2023. Read more

European Supervisory Authorities (ESAs) seek to bring clarification on the reporting of sustainability information in SFDR consultation

On 12th April, the European Supervisory Authorities (EBA, EIOPA, and ESMA) released a Consultation Paper with proposed amendments to SFDR. The proposed changes aim to address issues that have arisen since the introduction of SFDR, including extending the list of social indicators, refining adverse impact indicators, and adding product disclosures regarding decarbonisation targets. The ESAs also suggest further technical revisions to the SFDR Delegated Regulation to improve disclosures, simplify pre-contractual and periodic disclosure templates, and make other technical adjustments. The consultation is open for comments until 4th July 2023. Read more

EU lawmakers adopt legislative reforms to accelerate climate neutrality goals under ‘Fit for 55′ package

European governments and MEPs have agreed to reform the Emissions Trading System (ETS) to require specific sectors to reduce emissions by 62% by 2030 compared to 2005 levels. The revised programme includes gradually phasing out free allowances for ETS sectors from 2026, excluding the aviation sector, which will be phased out by 2026. The scope of industry coverage will also expand to include the maritime sector, and an ETS II will be created for fuel emissions from the building and road transport sector in 2027. To prevent carbon leakage from imports of goods, EU countries will implement the Carbon Border Adjustment Mechanism (CBAM) this year, with importers of carbon-intensive goods being charged the difference between the carbon price paid in the country of production and the price of carbon allowances in the EU ETS. Lastly, the EU Parliament has passed legislation banning the sale of deforestation-linked products in the EU, requiring due diligence statements from companies that produce palm oil, cattle, soy, coffee, cocoa, timber, and rubber, as well as derived products. Read more

EU Parliamentary committee approves draft EU Corporate Sustainability Due Diligence Directive (CSDDD)

On 25 April, MEPs reached a cross-party agreement to impose sustainability reporting requirements on large companies that will cover child labour, slavery and environmental impact. The legal affairs committee of the European Parliament approved the draft EU Corporate Sustainability Due Diligence Directive, which requires large companies to identify and address human rights abuses and environmental damage caused by their suppliers. The directive will apply to EU companies with a turnover of more than €40 million and more than 250 employees, and also to non-EU companies with a net turnover of at least €40 million in the bloc. Negotiations with EU states will now begin, and the directive could be rolled out in stages from around 2030.Read more

German Financial Authority Clarifies Collaborative ESG engagement by investors 

On March 30th, BaFin, Germany’s financial regulator, shared its perspective on collaborative engagement by investors, which is particularly relevant for investors who seek to support a company’s pursuit of ESG goals. This engagement could meet the requirements of “acting in concert,” which under German law may lead investors to make a mandatory takeover offer and lose their shareholding rights if they fail to comply. BaFin presented six examples to illustrate its stance, including that investors can meet with management to discuss specific ESG topics and send joint letters to address ESG concerns, as long as they do not agree on voting behaviour. BaFin’s position appears to be rather permissive, which may provide investors with a secure space to pursue ESG goals with greater legal certainty in German companies. Read more

United Kingdom

UK Policy Paper for sustainable farming and nature recovery

As part of the UK’s updated Green Finance Strategy, with the aim to achieve targets for net zero and nature recovery, the UK government published a policy paper requiring a significant increase in funding for nature. The paper advocated private sector involvement in mobilising the necessary green finance for farmers, land managers, and coastal managers to accelerate environmental action. The framework for nature markets outlines how the government will guide and support the development of these markets to increase investment levels. It also sets out the UK’s vision for establishing integrity and principles within the market framework to build trust and confidence, allowing markets to grow in pace with the country’s environmental ambition. Read more

UK consults on carbon border adjustment mechanism (CBAM)

The UK is seeking views on introducing a carbon border adjustment mechanism (CBAM) to mitigate carbon leakage and ensure its industries can decarbonize effectively. The consultation covers a range of potential policy measures, including mandatory product standards, product labelling, public procurement initiatives, and emissions reporting to encourage decarbonization. The earliest date for implementation of a potential CBAM would be 2026, and it would impact sectors such as cement, chemicals, glass, iron and steel, and power generation. The consultation is open for comments until June 22, 2023. Read more

North America

Federal Reserve Bank of New York publishes reports on climate risk

The Federal Reserve Bank of New York released two reports on climate-related risks for financial institutions on April 7, 2023. The first report analyses US banks’ exposure to transition risks from climate change, and the second report discusses the design of climate stress tests to manage macroprudential risks in the financial sector. Although the reports do not impose legal requirements, they offer insights into the positions of banking regulators on climate-related risk management requirements and current industry practices. The reports suggest the need for additional research on the nexus between financial stability and climate risks, deeper analysis of the interactions between climate change and the overall economy, and consideration of political economy considerations. The reports conclude that further research is required to identify better models and data, suggesting that climate stress testing should not yet be used to set capital requirements.  Read more

Asia Pacific

HKEX proposes mandatory climate reporting from 2024

Hong Kong Exchanges and Clearing Limited (HKEX) is soliciting feedback on proposed changes to the ESG reporting framework, with a specific focus on enhancing climate-related disclosures by listed issuers. The proposed changes include mandating all issuers to make climate-related disclosures in their ESG reports, moving away from the current “comply or explain” approach. The new disclosures would be organized under four core pillars: Governance, Strategy, Risk management, and Metrics and targets, and would cover various aspects related to climate-related risks and opportunities, governance processes, financial effects, GHG emissions, and industry-based metrics. Interim provisions would allow issuers time to comply, with emissions reporting (including Scope 3) expected for financial years commencing on or after 1 January 2026. The consultation paper is released ahead of the finalization of the ISSB Standards to give issuers more time to review and prepare for the proposed climate-related disclosures. Read more

Australian Green Taxonomy and Anti-greenwashing measures 

The Australian government is taking measures to combat greenwashing, develop a sustainable finance taxonomy, and introduce a sovereign green bonds programme to speed up the country’s economic transition. The government will co-fund with industry groups the initial development of the sustainable finance taxonomy, which will include a “traffic-light” system to differentiate between green, transition, and excluded economic activities. The government will also introduce a sovereign green bonds programme once a green bonds framework is developed to increase private capital allocation to public projects needed to decarbonise the economy. Additionally, the country’s existing house energy rating scheme will be expanded and upgraded to make Australian homes more energy-efficient. These measures are part of Australia’s intensified climate change policy agenda following its pledge to reduce emissions by 43% below 2005 levels by 2030.  Read more

ASEAN Updates Green Taxonomy 

The Association of Southeast Asian Nations (ASEAN) Taxonomy Board (ATB) released the ASEAN Taxonomy for Sustainable Finance Version 2, demonstrating Asia’s commitment to meeting the Paris Agreement commitments. Similar to the EU Taxonomy Regulation, the ASEAN Taxonomy aims to standardize the classification of sustainable activities and assets to provide a “common language” for assessing a company’s sustainability. Version 2 includes advanced assessment methodologies, technical screening criteria, and science-based thresholds to classify activities. The ASEAN Taxonomy’s third Essential Criteria now includes social aspects, alongside “Do No Significant Harm” and “Remedial Measures to Transition.” The ATB plans to conduct consultations with stakeholders on the assessment methodology and metrics for the energy sector under the Plus Standard, aiming to finalize the TSC for the energy sector by early 2024.  Read more

Reserve Bank of India issues green deposit guidelines 

On 11 April, the Reserve Bank of India introduced a new framework for green deposits starting June 1, 2023. The framework encourages regulated entities to offer green deposits to promote credit flow to green projects, support sustainability agendas, and address greenwashing concerns. All commercial banks must comply with the framework, and green deposits will only be issued in Indian rupees. The framework includes clear guidelines for third-party verification and allocation of proceeds and provides categories for use of proceeds in various green sectors.  Read more

Other News & Resources

• IOSCO calls on stakeholders to provide feedback on the International Auditing and Assurance Standards Board’s (IAASB) proposed new standard for sustainability assurance. The consultation period will commence in the latter half of July or early August 2023.Read more
• China and Singapore to launch Green Finance Task Force. Read more

 

Have we missed anything?
ESG Book manages the world’s largest repository of sustainability reporting provisions with over 2,300 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

As the ESG debate has been heating up in the US, Dow Jones’ Angela Pavlos gives us the perspective of a global media firm with US headquarters. Angela is a product manager and leads the development of ESG data products aiming to help CSOs and investors. Where will the ESG data market go? What role does the media have in this? Tune in to learn more.

 

DISCLAIMER

ESG Book, registered with Companies House under Company No. FC035689 and UK establishment no. BR020774, and with registered office at Fifth Floor, Jamestown Wharf, 32 Jamestown Road London, NW1 7BY, is the UK branch of ESG Book GmbH, a limited liability company organized under the laws of Germany, with registered number HRB 113087 in the commercial register of the court of Frankfurt am Main, and having its seat and head office at Zeppelinallee 15, 60325 Frankfurt am Main, Germany.

PROFESSIONAL ADVICE – This podcast is provided for general information purposes only and does not constitute professional advice. If professional advice is required, services of a competent professional should be sought. THIRD PARTY INFORMATION – Certain information contained in this podcast has been obtained from sources outside ESG Book. While such information is believed to be reliable for the purposes used herein, no representations are made as to the accuracy or completeness thereof and none of ESG Book or its affiliates accepts any responsibility for such information. RELIANCE – ESG Book makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and accepts no liability for any loss, of whatever kind, howsoever arising, in relation thereto, and nothing contained herein should be relied upon. TRADEMARK – “ESG Book” and other words or symbols in this document that identify ESG Book products and services are product and service marks of ESG Book. Other words or symbols in this document that identify other parties’ goods or services are the trademarks or service marks of those other parties. VIEWS EXPRESSED – Any views or opinions presented are solely those of the speaker, and do not necessarily represent the views or opinions of ESG Book. ENQUIRIES – Any enquiries in respect of this podcast should be addressed to ESG Book or its affiliates.

In March, the IPCC released its sixth assessment report which illustrates a critical need to accelerate climate policy action due to a ‘rapidly closing window of opportunity to secure a livable and sustainable future for all’. Despite the current state of play, the IPCC is optimistic that strategic macroeconomic policies would help unlock climate finance and support investment in low-emission infrastructure and technologies.
In the EU, regulators are launching initiatives that build on the ‘Fit for 55’ package to cut emissions by 55% by 2030, compared to 1990 levels. The EU Council and Parliament announced a proposal to revise the Renewable Energy Directive, orchestrating a shift towards the use of clean energy and fuel across the bloc. Regulators are also tackling transition in the maritime sector by introducing carbon intensity reduction targets for large ships. In the financial services sector, the ECB released its first set of climate-related financial disclosures that show a positive trend towards portfolio decarbonization.
Across the Channel, regulators in the UK are defining a pathway to net zero through the intersection of finance, technology and innovation. Among other priority areas, the UK ‘s latest Green Finance Strategy seeks to mobilize private finance in the realm of clean energy and technologies.
In the Americas, the commitment to climate action is being driven in large part by federal governments conscious of the expenditure on carbon-intensive infrastructure. In March, the Canadian Government introduced climate disclosure requirements for major federal suppliers with the purpose of “greening its operations”.
India is also multiplying sustainability governance on many fronts, starting with the Securities and Exchange Board of India’s ESG disclosure rules for corporates and a new classification system for ESG mutual funds.
Across the world, there is a sustained increase in the number and types of policy instruments to increase transparency, accountability and efficiency in the allocation of capital. Global financial regulators are faced with widespread sustainability-related risks which may not be adequately addressed through unilateral policy measures. As stated in the latest IPCC report, the enduring and inclusive quality of global sustainability regulation rests on multi-level governance and calculated coordination across multiple policy domains.

Europe

Proposal to revise EU Renewable Energy Directive

The European Council and EU Parliament reached a provisional agreement to increase the EU’s overall renewable energy use. The revised directive mandates that the EU’s total energy consumption must consist of 42.5% renewable energy by 2030. Each member state must adhere to sector-specific targets in transport, industry, buildings and district heating and cooling. The agreement offers several options for member states to lower carbon intensity, including the adoption of binding year-on-year transition targets for each sector. The Renewable Energy Directive will enhance the implementation of the EU’s ‘Fit for 55’ package and boost the region’s energy security by speeding up the permit approval process for renewable energy projects. Member states will have to reach a consensus on the agreement before it enters into force.Read more

Provisional agreement reached on European Green Bond Standard

Key negotiators in the European Parliament have established the first ‘best-in-class’ green bond standard. Companies issuing green bonds in accordance with the standards can communicate the use of proceeds in a substantive disclosure. Disclosures would provide decision-useful information to investors, allowing them to suitably add sustainable technologies and businesses to their portfolio. In addition to enhancing transparency, companies that adopt the EUGBS will be aligned with the EU Taxonomy’s classification system for sustainable economic activities.Read more

EU reaches deal on ‘FuelEU Maritime’

A new agreement was signed by EU lawmakers to significantly reduce carbon intensity in the maritime transport sector through the use of low-carbon fuels. The maritime sector contributes to 3-4% of the EU’s CO2 emissions and the law aims to induce demand in the sustainable maritime fuels market. The law provides for 80% maritime decarbonisation by 2050, starting with a 2% ship emissions reduction by 2025. Currently, the regulation is applicable to ships above 5,000 tonnes and it includes a requirement for zero-emissions at berth. Container ships and passenger ships docking at major EU ports must also use onshore power supply by 2030. Under the new law, ships may collectively demonstrate compliance with intensity targets by opting into a voluntary pooling system.Read more

ECB’s first climate-related disclosures reflect portfolios’ path to decarbonization

The ECB has published two reports on climate-related financial disclosures that give a detailed overview of its portfolios’ carbon footprint, physical risk exposure, climate-related governance and risk management. A review of the Eurosystem’s corporate sector portfolios shows a gradual trend towards decarbonisation, in part due to emissions reduction efforts from companies in the ECB’s portfolio for every million euro of revenue earned. Additionally, the Eurosystem is reducing relative emissions by tilting its corporate bond purchasing towards issuers with better climate performance. In the second report, the ECB signals the readiness of central banks in the euro monetary zone to boost transparency by meeting standardised climate reporting requirements based on recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). These will be published by the end of April. Both the ECB’s reports are a concrete step towards deploying the commitments laid out in its climate change action plan. The ECB’s forward-looking initiative to integrate climate risk in its strategy and operations will continue with a periodic review of policy measures and a decarbonization path in line with the Paris Agreement. Read more

United Kingdom

UK releases updated Green Finance Strategy

The UK Government released the Mobilizing Green Investment: 2023 Green Finance Strategy to strengthen the UK’s transition economy and create a sufficient pathway to achieve net zero goals. It provides a blueprint to close investments gaps and reorient capital towards clean technologies and renewables projects. In addition to furthering climate neutrality objectives, the government will explore the development of high-integrity voluntary nature markets in the UK. Read more

North America

Government of Canada to require major federal suppliers to disclose emissions and set reduction targets

Under the newly adopted “Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets” federal contractors will be obligated to report emissions and set greenhouse gas reduction targets that are aligned with the Paris Agreement. The disclosure requirements will be in effect from April 2, 2023. Suppliers can satisfy the conditions of this rule by participating in Canada’s Net Zero Challege – a voluntary initiative that encourages businesses to create an effective transition plan for achieving net zero emissions by 2050. In addition to the disclosure rule, the new Treasury Board also announced the Standard on Embodied Carbon in Construction for major government construction projects to report and reduce embodied carbon footprint. Read more

Asia Pacific

SEBI finalizes core metrics for ESG disclosures and code of conduct for ratings providers

India’s top financial regulator launched the Business Responsibility and Sustainability Report (BRSR) Core – a set of essential ESG indicators for top listed companies. BRSR Core consists of under 50 reporting metrics derived from global standards (GRI, TCFD, SASB, SDG SASB). The Core framework will be supplemented with sector-specific guidance to ensure reliable disclosures consistent with corporate sustainability data across global jurisdictions. SEBI will also create a code of conduct for ratings providers and provide oversight in accordance with IOSCO recommendations. Regulation in this area is necessary to ensure a low degree of discrepancy between ratings methodologies. This would help appropriately reorient capital flows towards transition activities. Similarly, SEBI has proposed a rule to distinguish between different types of ESG mutual funds. SEBI is among many Indian regulators tightening disclosure rules to ensure that investors are not misled by unsubstantiated sustainability claims.Read more

Other News & Resources

• European Commission proposes Green Claims Directive to verify environmental labeling of products. Read more
• TNFD releases final draft of disclosure framework. Read more
• HM Treasury consultation on a future regulatory regime for ESG rating providers open until 30 June 2023.

 

Have we missed anything?
ESG Book manages the world’s largest repository of sustainability reporting provisions with over 3,400 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

Last week, the European Commission proposed the Net-Zero Industry Act to advance the manufacturing capacity of strategic net-zero technologies in the European Union (EU). The Net Zero Act is part of the EU’s Green Deal Industrial Plan to enhance the competitiveness of Europe’s clean tech industry and support the fast transition to climate neutrality. This is positive momentum for climate change regulations after the largest federal legislation on climate change in the United States, the Inflation Reduction Act, was signed into law in August last year.

The Net-Zero Industry Act in brief 
The Net-Zero Industry Act aims to ensure that, by 2030, the manufacturing capacity of strategic net-zero technologies in the European Union reaches a benchmark of at least 40% of the EU’s domestic annual deployment needs for corresponding technologies. This increased capacity is necessary to achieve the climate and energy targets, including of being a climate-neutral continent by 2050.

The Act outlined several pillars to achieve its 2030 target:

1. Facilitating Investments – Streamlining the permitting processes for net-zero technology manufacturing projects where strategic net-zero projects will be granted priority status, with a maximum permit-granting time limit of not exceeding 12 or 18 months depending on the yearly manufacturing capacity of the project;
2. Increasing CO2 Injection Capacity – Achieve an annual injection in CO2 storage of 50Mt Co2 by 2030;
3. Facilitating Access to Market – Integrating sustainability and resilience criteria into public procurement bids to create stable public demand for net-zero technologies to generate an economic incentive for businesses to scale up production;
4. Enhancing Skills for Quality Job Creation in Net-Zero Technologies – Ensuring the availability of a skilled workforce where specialised European Skills Academies focussing on a net-zero technology will provide courses to reskill and upskill workers;
5. Encouraging Innovation – Providing a testing ground for innovative net-zero technologies in a controlled environment through regulatory sandboxes, with priority access for small and medium enterprises

The Act also proposed setting up the Net-Zero Europe Platform to allow the Commission to coordinate the above actions jointly with Member States. The Net-Zero Europe Platform will work closely with the relevant industry alliances to support with financing, reducing bottlenecks, and developing best practices for net-zero projects.

Net-Zero technologies covered under the proposed legislation are:

• Solar photovoltaic and solar thermal technologies
• Onshore wind and offshore renewable technologies
• Battery/storage technologies
• Heat pumps and geothermal energy technologies
• Electrolysers and fuel cells
• Sustainable biogas/biomethane technologies
• Carbon capture and storage (CCS) technologies
• Grid technologies

The Net-Zero Industry Act covers net-zero technologies that are first of its kind and are ready for commercial demonstration and deployment, and also include the main upstream components that are a central part of the respective technologies (eg. solar cells for solar modules).

Next Steps 
The Net-Zero Industry Act needs to be agreed upon by the European Parliament and the Council of the European union before its adoption and entry into force.

In this latest ESG Quick Takes podcast episode, ESG Book’s Isabel Verkes speaks to Amantia Muhedini, Executive Director of Sustainable and Impact Investing at the UBS Global Wealth Management Chief Investment Office, to discuss sustainable investing practices and the relationship between returns and sustainability.

 

DISCLAIMER

ESG Book, registered with Companies House under Company No. FC035689 and UK establishment no. BR020774, and with registered office at Fifth Floor, Jamestown Wharf, 32 Jamestown Road London, NW1 7BY, is the UK branch of ESG Book GmbH, a limited liability company organized under the laws of Germany, with registered number HRB 113087 in the commercial register of the court of Frankfurt am Main, and having its seat and head office at Zeppelinallee 15, 60325 Frankfurt am Main, Germany.

PROFESSIONAL ADVICE – This podcast is provided for general information purposes only and does not constitute professional advice. If professional advice is required, services of a competent professional should be sought. THIRD PARTY INFORMATION – Certain information contained in this podcast has been obtained from sources outside ESG Book. While such information is believed to be reliable for the purposes used herein, no representations are made as to the accuracy or completeness thereof and none of ESG Book or its affiliates accepts any responsibility for such information. RELIANCE – ESG Book makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and accepts no liability for any loss, of whatever kind, howsoever arising, in relation thereto, and nothing contained herein should be relied upon. TRADEMARK – “ESG Book” and other words or symbols in this document that identify ESG Book products and services are product and service marks of ESG Book. Other words or symbols in this document that identify other parties’ goods or services are the trademarks or service marks of those other parties. VIEWS EXPRESSED – Any views or opinions presented are solely those of the speaker, and do not necessarily represent the views or opinions of ESG Book. ENQUIRIES – Any enquiries in respect of this podcast should be addressed to ESG Book or its affiliates.

Throughout the world there have been many sustainable finance policy focused initiatives. This includes rules aiming for greater ESG and climate data transparency and tackling greenwashing in financial markets.In this latest ESG Quick Takes podcast episode, ESG Book’s Isabel Verkes speaks to Inna Amesheva and Aishwarya Shukla, to discuss the key regulatory developments of 2022 and 2023 so far. Learn more in our ESG Policy Digest February update and out January update.For monthly ESG policy updates, subscribe to our newsletter.

 

DISCLAIMER

ESG Book, registered with Companies House under Company No. FC035689 and UK establishment no. BR020774, and with registered office at Fifth Floor, Jamestown Wharf, 32 Jamestown Road London, NW1 7BY, is the UK branch of ESG Book GmbH, a limited liability company organized under the laws of Germany, with registered number HRB 113087 in the commercial register of the court of Frankfurt am Main, and having its seat and head office at Zeppelinallee 15, 60325 Frankfurt am Main, Germany.

PROFESSIONAL ADVICE – This podcast is provided for general information purposes only and does not constitute professional advice. If professional advice is required, services of a competent professional should be sought. THIRD PARTY INFORMATION – Certain information contained in this podcast has been obtained from sources outside ESG Book. While such information is believed to be reliable for the purposes used herein, no representations are made as to the accuracy or completeness thereof and none of ESG Book or its affiliates accepts any responsibility for such information. RELIANCE – ESG Book makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and accepts no liability for any loss, of whatever kind, howsoever arising, in relation thereto, and nothing contained herein should be relied upon. TRADEMARK – “ESG Book” and other words or symbols in this document that identify ESG Book products and services are product and service marks of ESG Book. Other words or symbols in this document that identify other parties’ goods or services are the trademarks or service marks of those other parties. VIEWS EXPRESSED – Any views or opinions presented are solely those of the speaker, and do not necessarily represent the views or opinions of ESG Book. ENQUIRIES – Any enquiries in respect of this podcast should be addressed to ESG Book or its affiliates.

In the fleeting month of February it may be easy to overlook a flurry of regulatory activity that signals the continuity and confluence of ESG in policymaking matters. This month’s ESG Book Policy Digest explores a coincidental set of global initiatives aimed at mobilizing green bond markets. In Europe, legislators made strides in setting up voluntary EU green bond standards (EUGBS) to provide a legitimate system for the issuance of green bonds by financial market participants. The depth and breadth of sustainability reporting is also under review by the European Central Bank (ECB), which expressed its approval of the draft European Supervisory Reporting Standards (ESRS) that outline ESG metrics for demonstrating compliance with the Corporate Sustainability Reporting Directive (CSRD). The EU has additionally underscored a focus on its ‘Green Industrial Plan,’ hinting at a ‘laissez faire’ approach that will enable the growth of a competitive clean energy economy. In the EU Parliament, the Environmental Committee issued a legislative mandate that would require all private sector entities to achieve climate neutrality by 2050. Oversight activity related to climate risk will also extend to the own risk and solvency assessment (ORSA) in 2023, as evidenced by the European Insurance and Occupational Pensions Supervisory Authority’s (EIOPA) latest action plan. In neighbouring UK, the Capital Markets Authority (CMA) has issued guidance to help firms reach environmentally sustainable agreements without breaching competition rules.

In India, the Reserve Bank of India (RBI) has announced new guidelines for climate risk management. India’s Securities and Exchange Board of India (SEBI) became the latest authority to formulate its own fund labelling regime in lockstep with global regulators such as the U.S. Securities and Exchange Commission (SEC) and the European Securities Markets Authority (ESMA). Additionally, SEBI released a set of operational guidelines for green bond issuers. Also in Asia Pacific, Chinese regulators are reportedly due to instate mandatory ESG disclosure requirements for listed firms. Finally, in the Philippines, the Securities and Exchange Commission created draft guidance on sustainability bonds that will be applicable to ASEAN-based issuers.

This month’s ESG Policy Digest updates signal that regulators worldwide are emphasising the idea that sustainability regulation does not necessarily overwrite existing rules, but rather serves to provide guidelines for the consistent interpretation of a modified rules-based system of governance for more robust financial markets.

International

Nations Agree Historic Oceans Treaty

After a decade of negotiations, nations have achieved a landmark accord to safeguard the world’s oceans. The High Seas Treaty seeks to secure and restore marine ecosystems by designating 30% of the oceans as protected areas by 2030. The accord was reached at the UN headquarters in New York on 4th March, after 38 hours of discussion, resolving disputes over funding and fishing rights that had delayed negotiations for years. The most recent international agreement on ocean conservation was the UN Convention on the Law of the Sea, which was signed 40 years ago in 1982. This agreement recognized the high seas as international waters where all countries have the right to conduct research, fish, and navigate, but only 1.2% of these waters are currently safeguarded.Read more

Europe

Provisional agreement reached on European Green Bond Standard

Key negotiators in the European Parliament have established the first ‘best-in-class’ green bond standard. Companies issuing green bonds in accordance with the standards can communicate the use of proceeds in a substantive disclosure. Disclosures would provide decision-useful information to investors, allowing them to suitably add sustainable technologies and businesses to their portfolio. In addition to enhancing transparency, companies that adopt the EUGBS will be aligned with the EU Taxonomy’s classification system for sustainable economic activities.Read more

ECB publishes staff opinion on draft ESRS

The European Central Bank has expressed support for the draft ESRS which strengthens the implementation of sustainability disclosure requirements under CSRD. The draft ESRS would help financial and credit institutions enhance the assessment of climate-related risk and resilience. In its draft form, the ESRS incorporates environmental reporting metrics such as Scope 1, 2 & 3 emissions and requires the disclosure of transition plans in line with a Paris-aligned climate scenario. Furthermore, to comply with CSRD, the reporting standards require private entities to provide estimates of physical and transition risk. Overall, ECB staff welcomed the definition of standards, targets and quantitative metrics as this will improve the availability of granular data relevant to ECB and other European Supervisory Authorities. Additionally, by making ESRS E1 mandatory, irrespective of materiality assessment, the ESRS also address the cross-cutting data needs of other EU climate legislation. The ECB has stated that its data collection efforts could, however, be distorted by an exemption from reporting for subsidiaries included in the consolidated reporting of the controlling entity. In conclusion, the ECB staff opinion letter notes that consistent and comparable data is the key to ensure the effective implementation of CSRD and any data aberrations could negate efforts to reduce the reporting burden.Read more

European Commission unveils Green Industrial Plan and ‘transition framework’

Following the passage of the Inflation Reduction Act (IRA) in the US, EU lawmakers pushed for a centralized plan to provide clean energy financing and subsidies that would help maintain competitiveness with US businesses. Last month, the European Commission announced the release of its ambitious Green Industrial Plan to expedite the scaling of net zero technologies and products and further the EU’s climate neutrality objectives. The industrial initiative relaxes state aid rules and eases the regulatory burden for companies operating in the EU. Members of the European Parliament strongly believe that the EU Single Market will undergo a transformation through the allocation of funding for clean technologies and training and development for green jobs. The Plan includes a production capacity framework that will ensure strategic dependencies in the global supply and value chain are accounted for and ‘do not put green transition at risk’.Read more

EU Parliamentary committee votes to strengthen climate “due diligence” obligations

In a landmark move, the EU environment committee voted to put in place stricter climate due diligence obligations for large companies and SMEs. CSRD is the newest legislation that requires companies to minimize adverse environmental impacts and prevent human rights violations across the value chain. For years, companies in the EU have outsourced carbon emissions abroad, where it may be easier to eschew manufacturing processes oversight. The Environment Committee within the EU Parliament voted to impose a mandate on the private sector to achieve climate neutrality by 2050, by primarily reducing greenhouse gas emissions. This means companies will have to formalize transition plans and monitor negative environmental impacts that conflict with the targets outlined in the 2015 Paris Agreement.Read more

EIOPA issues 2023 supervisory convergence plan focusing on ESG risks

The European pensions and Insurance regulator EIOPA published a Supervisory Convergence Plan for 2023 which includes a section on enhancing quality capital requirements (the second pillar of Solvency II plans). This means that the own risk and solvency assessment (ORSA) under the EU’s Solvency II directive may be adapted within the context of climate change. EIOPA currently supports the oversight of materiality assessment for climate-related risks and advocates for the integration of climate risks in ORSA. In 2023, EIOPA plans to monitor greenwashing and identify solutions to clarify consumers’ contractual obligations based on key findings from natural catastrophe insurance coverage (behavioural study). Furthermore, the authority will incorporate ESG risks into the upcoming comparative study on Life risk modeling. Read more

United Kingdom

UK CMA publishes guidance on competition laws applicable to environmental sustainability agreements

The UK’s Competition and Markets Authority (CMA) issued guidance for firms seeking opportunities to collaborate without breaching competition laws. The regulator illustrated use cases where rules would be “permissive” to help competitors share the costs and burden of mitigating climate change. According to the proposed guidelines, firms that enter into collaborative agreements that positively contribute towards environmental sustainability would not be in violation of competition laws. The CMA’s draft guidance is open for consultation until April 11, 2023. Read more

Asia Pacific

Indian central bank announces regulatory guidelines on climate risk and sustainable finance

On July 27, 2022, the Reserve Bank of India (RBI) published a discussion paper on climate risk and sustainable finance to solicit feedback from regulated entities on proposed changes in monetary policy. Based on public comments and analysis of feedback, the RBI released a framework for the acceptance of green deposits, disclosure requirements for climate-related risks and guidance on climate scenario analysis and testing. Before testing the preparedness of regulated entities, the RBI will consolidate resources for climate-risk management and issue guidelines in a phased manner. Read more

Indian securities regulator sets operational guidelines on green bonds

Under the new set of green bond guidelines, issuers of green debt instruments must outline sustainability objectives in the offer document. Issuers must also disclose details for determining the eligibility of financed projects and the use of proceeds. For increased transparency, green debt issuers will have to provide third-party verification of the use of proceeds and institute processes to assess continued eligibility of green bond projects and activities. The operational guidelines will be in effect from April 1, 2023.Read more

SEBI proposes new categories of ESG schemes for mutual funds

The Securities and Exchange Board of India (SEBI) proposed a new rule to create five new types of ESG mutual fund schemes – exclusions, best-in-class, integration, positive screening, impact and sustainable objectives. SEBI’s latest regulatory initiative allows asset management companies to launch only one of each fund type with a minimum of 80% investment in securities related to the thematic ESG focus. ESG funds will have to identify the sustainable investment strategy and details of the chosen ratings provider in disclosures. This follows similar initiatives by the US SEC, ESMA and the FCA in the UK to provide a fund-classification system that boosts transparency for investors. Read more

Chinese regulators poised to adopt mandatory ESG disclosure requirements

Regulatory authorities in China are considering the introduction of mandatory ESG reporting requirements for all public companies listed in China. According to the proposal, regulators are initially looking at having the new disclosures apply on a ‘comply or explain’ basis. The proposal builds upon a voluntary set of ESG reporting guidelines that came into effect on 1 June 2022, as well as the Chinese Securities Regulatory Commission proposal issued in May 2022 focusing on a revised disclosure regime for publicly listed entities. Once the new regulation comes into force, the first entities in scope would be state-owned enterprises who would be expected to issue their first reports as early as December 2023. Read more

Philippine SEC introduces guidance on sustainability-linked bonds

On February 2, 2023, the Securities and Exchange Commission (SEC) of the Philippines released a preliminary memorandum circular (MC) for public feedback regarding the issuance of sustainability-linked bonds (SLB) in the Philippines, in accordance with the ASEAN Sustainability-Linked Bond Standards (ASEAN SLBS). This aims to promote the use of sustainability-linked bonds in financing companies that prioritize sustainability. According to the guidelines, the entity issuing the bonds must either be an ASEAN issuer or a non-ASEAN issuer that has key performance indicators (KPIs) associated with an ASEAN member nation. Final comments on the proposal were due by 17 February 2023. Read more

Singapore Green Taxonomy in final consultation phase

Singapore is set to finalize its green and transition taxonomy for financial institutions. The final consultation seeks input from stakeholders on thresholds and criteria for five sectors: agriculture and forestry/land use; industrial; waste and water; information and communications technology; and carbon capture and sequestration. The Green Finance Industry Taskforce (GFIT) is deliberating a ‘measures-based’ approach to account for the uncertainty in technological solutions to achieve net zero in the industrial sector. This approach would complement Singapore’s traffic light classification which sets targets and criteria for transition activities that allow for a ‘progressive shift towards a net zero outcome across different sectors.’ Read more

Other News & Resources

• IFRS Sustainability and Climate Reporting period to begin in 2024. Read more
• NGFS seeks feedback on climate scenarios from interested stakeholders. Read more
• ASCOR publishes consultation report for the first public investor framework to assess sovereign bond issuers on climate change. Read more
• GRI Mining Standards open for stakeholder consultation. Read more
• SBTi adds land metrics to target-setting framework. Read more

 

Have we missed anything?
ESG Book manages the world’s largest repository of sustainability reporting provisions with over 3,400 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

2023 marks a considerable shift in priorities at the intersection of politics and business. This was evident at the World Economic Forum in Davos, where regulators and industry leaders set out key objectives to revitalize the global economy and promote sustainable development in an increasingly turbulent and fragmented world. In the aftermath of a global energy crisis, regulators are vying for market stability and a steady decoupling from unsustainable fossil fuel assets. Consequently, clean energy financing was widely debated in Davos as part of a larger incentive scheme across the EU. In the policymaking world this month, the European Central Bank was in the spotlight after launching a new set of indicators to help banking organizations measure emissions and track green finance flows.

Ahead of Davos, US governmental bodies announced a series of policy measures to accelerate growth and investment in ‘green’ economic activities. First, the US Securities and Exchange Commission (“SEC”) confirmed the issuance of a finalized Climate Disclosure rule in April 2023. Also, this month, the White House revealed a nature-based accounting system to measure the value of natural resources in economic terms. Turning to the banking sector, the US Federal Reserve launched a pilot exercise to gain insight into the banking sector’s preparedness and resilience in terms of climate-related risks.

In other parts of the world, ESG policies focused on regulating companies and data providers. Australia’s carbon trading scheme is under scrutiny after an independent investigation of emissions offsetting methods. In South Korea, the Financial Supervisory Service (FSS) has created guidance for ratings agencies that conduct ESG-bond evaluations.

Sustainability regulation around the world provides the necessary checks and balances for financial markets whose logic is often embedded in oscillating behavior-driven choices. Although the number of ESG policy interventions restores optimism in the pace of transition, we must also acknowledge the influence of a growing list of ESG critics and polarized debate. Regulators need to stand up to the challenge of providing market certainty and clarity, while not stifling innovation and entrepreneurship.

Europe

ECB launches statistical indicators to help banks analyze climate-related risks

The ECB introduced a set of indicators to help assess climate-related risks in the financial services sector and monitor the flow of green transition finance. The ‘analytical’ indicators – financed emissions (FE) and carbon intensity (CI) – measure carbon emissions financed by the financial services sector. Financed emissions would measure an issuer’s total greenhouse gas emissions weighted by the investment as a share of the company’s total value. The resultant Financed Emissions is a unit of measure that can be compared to the production value of the company to calculate Carbon Intensity, with an additional consideration of transition risk indicators and exposure of loans and securities to high-emitting economic activities. The ECB has also included sustainable finance indicators in the data set to track the progress of sustainability-linked bonds in the EU market. At this stage, the ECB metrics are ‘experimental indicators’ and the ECB has advised to use them ‘with caution’. The ECB welcomes comments and feedback, however, no deadline regarding the implementation of the indicators has been specified.
Read more

US clean energy package encourages EU lawmakers to introduce centralized green incentives system

The United States earmarked a substantial portion of the federal budget for clean energy subsidies. European legislators noted that the multi-billion-dollar package would create a huge windfall for clean energy businesses in America. To remain competitive with the US, several member states are now calling for an EU-wide measure to scale investment in alternative energy. Regulators and industry leaders also discussed the reality of record high energy prices which necessitate a shift towards renewable energy. However, currently, there is no stopgap EU-wide measure that would expedite the permit process for renewable energy companies.Read more

Americas

SEC confirms final Climate Disclosure Rule in April

The SEC announced that it would release the final rule to enhance climate-risk reporting for investors in April. Central to the rule is a GHG emissions reporting requirement to facilitate comparability between investment securities. Emissions metrics will be a critical component for the standardization of ESG data, which, in turn, will help funnel capital inflows towards climate-related investment opportunities. Additionally, the rule seeks alignment with international standards for climate disclosures. The SEC has integrated nearly all TCFD recommendations – the leading authority on climate-related risk disclosures used by most corporates, investors and securities regulators. However, the regulator has faced continuous backlash in the form of pre-emptive policymaking in conservative state legislatures. Many state treasuries have also taken concrete steps to oppose the rule within their jurisdiction by placing ‘woke’ asset management firms such as BlackRock on a divestment list. Though the rule is favored by a majority of SEC regulators, a handful of dissidents have commented on the pecuniary implications of compliance as auditing costs will more than double for covered entities. Read more

Biden-Harris administration unveils national strategy for nature-based accounting

On January 19, the White House released a national strategy to measure the economic value of natural resources with statistical data and drive sound policy decisions. Special Envoy for Climate Change, John Kerry announced the plan during a speech at the Word Economic Forum in Davos, Switzerland stating that the initiative “will put nature on the national balance sheet”. The accounting of natural capital in the US economy provides insight into the value of healthy ecosystems through an economic lens. Executive branch organizations and agencies can use this data to examine the impact of climate change on long-term economic growth. This, in turn, can help regulators identify depleting natural assets and integrate environmental risk into economic policy. A national biodiversity strategy will also have broader implications for the private sector, creating opportunities for industries that are least impacted by nature loss and natural disasters, such as renewable energy, to attract investment. Read more

US Fed launches Climate Scenario Analysis Exercise for banks

The Federal Reserve is conducting a climate scenario analysis (CSA) for six large US banking organizations. Participating banks must provide an estimate of the impact of scenarios on specific assets in their loan portfolios. For physical risk assessment, a banking organization must show how climate scenarios affect commercial and residential real estate portfolios over a one-year time horizon in 2023. The transition-risk module considers the effect of scenarios on corporate loans and real estate loan portfolios altogether over a 10-year time horizon from 2023 to 2032. Data from physical risk and transition-risk modules must be supplemented by quantitative responses on climate-risk management practices. The Federal Reserve will collect responses until July 21, 2023. Read more

Asia Pacific

Australian carbon trading scheme set for reform

An independent review of Australia’s scheme for providing carbon credits raises questions around the efficacy of greenhouse gas emissions reduction methods. This means that entities purchasing credits on the carbon market may not offset their emissions in real terms such as avoided deforestation and human-led native forest regeneration. To remedy the discrepancy in the carbon credits scheme, the review panel has proposed a new ‘carbon abatement integrity committee’. The Australian government has concluded that the scheme is functioning adequately, however it plans on incorporating recommendations from authorities in future. Read more

South Korea’s FSS introduces ESG ratings guidelines

The Financial Supervisory Service (FSS) of Korea introduced a set of guidelines for the standardization of ESG ratings methodologies. Credit ratings agencies that validate ESG bonds can incorporate assessment criteria in the “Guidelines” and consequently establish consistent standards across different agencies. Agencies that provide comparable evaluation reports and verify the use of funds can help provide decision-useful information to investors and prevent the occurrence of greenwashing practices in a nascent industry. The FSS also proposed minimum investment ratios as part of disclosure requirements for ESG bond evaluation. The guidelines will be effective from February 1, 2023, and Korea’s Financial Services Association will recognize the ESG certification process as best practice. Read more

Other News & Resources

• EBA publishes Roadmap to Sustainable Finance: The leading standard-setting body will finalize climate-related risk disclosures and a biodiversity framework for corporate reporting in 2023. Read more
• Indian financial institutions unprepared to deal with climate risks. Read the latest report by think-tank ODI’s Sarah Colenbrander, in partnership with researchers from the Climate Bonds Initiative and adviser auctusESG.

Have we missed anything?
ESG Book manages the world’s largest repository of sustainability reporting provisions with over 3,400 regulations across 71 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

In 2022, policy became a vehicle to reorient capital flows through multiple routes, at different levels – international and domestic. The convergence of standards and frameworks created direct links between a variety of actors in sustainable finance. Despite geopolitical turmoil and shadowy economic forecasts, regulators are pursuing the sustainability objective through timely and fortuitous interventions.

The European Union continues to be the epicenter of ESG-related policymaking. In December, the EU passed legislation banning the sale of products linked to deforestation activities. European regulators are also revisiting provisions in the Corporate Sustainability Reporting Directive (CSRD) to potentially grant exemptions to the financial services sector. The European Insurance and Occupational Pensions Authority (EIOPA) is conducting a deep study on the impact of climate and social risks on long-term investments. The Swiss government is set to launch its own version of an ESG fund labelling rule to provide decision-useful information for sustainable investing. Despite banks likely escaping the remit of EU sustainability rules, the Basel Committee has initiated vital action by providing guidance to the banking sector on integrating climate-related financial risks. In the United Kingdom, plans are underway to open consultation on the supervision of ESG ratings providers. Regulatory reform in the ESG realm continues in the U.S., with the Federal Reserve proposing a climate-risk framework for big banks. In Asia, the Green and Sustainable Finance Cross-Agency Steering Group has announced a collaboration with the Carbon Disclosure Project to help improve the quality of ESG data in Hong Kong for first-time reporting SMEs.

With a new year beginning, policymakers and practitioners will embark on an intellectual endeavour to create consistent global sustainability reporting rules. Though many challenges and pitfalls lie ahead, 2023 promises to be a substantial year characterized by increasing investment in adaptation and social sustainability.

Europe

EU reaches deal on deforestation-free supply chains

The European Union has reached an agreement to ban the sale of deforestation-linked products in the EU market. Products including palm oil, cattle, soy, coffee, cocoa, timber and rubber as well as derived products such as beef, furniture and chocolate are covered by the regulation. Companies will have to issue a due diligence statement verifying that the production of these goods has not caused damage or degradation of forest ecosystems anywhere in the world after 31 December 2020. However, banks will be exempt from the due diligence obligations for at least two years. This regulatory initiative underscores the COP15 agenda to establish a post-2020 global biodiversity framework for achieving measurable nature-positive outcomes.
Read more

Banking & finance may be exempt from CSRD requirements

On November 28, the EU Council and European Parliament reached an agreement to adopt the Corporate Sustainability Reporting Directive (CSRD). The legislation
significantly expands mandatory sustainability disclosure requirements for all large EU companies operating in the EU. More recently, the EU Council proposed to exempt banks and investment funds from CSRD following resistance from several member states including Spain, France, Italy and Slovakia. The draft proposal allows each member state to decide whether financial services providers should account for their environmental and social footprint. Speculation about the rule will continue in the banking and financial services sector until the final version is published over the course of 2023.Read more

EIOPA considers sustainable investing impact on solvency risks

The European insurance authority published a discussion paper on the prudential treatment of sustainability risks. EIOPA is working to determine whether the consideration of environmental and social factors is “warranted” under the Solvency II risk-based framework. In the discussion paper, EIOPA provides guidance on assessing transition risks and its potential impact on prudential risks related to bonds, stocks and real estate. On the climate front, the paper examines underwriting risk on non-life insurance based on climate change adaptation. EIOPA’s final focus area is prudential treatment of social risks. The regulator is
inviting feedback from stakeholders until 5 March 2023.Read more

Switzerland proposes ESG fund labelling rule

The Swiss Federal Council released a position paper on sustainable investing rules to prevent greenwashing. The proposed rule requires funds that are labelled ‘sustainable’, ‘green’, or ‘ESG’ to pursue the suggested sustainability objective by setting quantifiable targets. This suggests alignment between linked economies as regulators in the UK, US and EU are working simultaneously to formalise policies that protect financiers from being misled by exaggerated ESG-related claims. Unsurprisingly, different versions of the same rule are being announced to increase transparency and ease of comparability between financial products. In Switzerland, a working group under the Federal Department of Finance will oversee the implementation of the final rule which will be released by the end of September 2023. Read more

Basel Committee recommends integrating climate risks into existing capital rules

The Basel Committee on Banking Supervision has published responses to FAQs on how banks should incorporate climate-related financial risks. The committee of global financial regulators aims to “promote consistent interpretation” of the existing Basel Framework. Many FAQs seek to clarify best practices with respect to judging exposure of assets and credit risk ratings based on climate risks. The recommendations are also in alignment with the Basel Committee’s principles for the effective management and supervision of climate-related financial risk. Read more

United Kingdom

UK set to regulate ESG data and ratings providers

Chancellor of the Exchequer, Jeremy Hunt, announced a series of regulatory reforms to boost growth in the financial services sector following Brexit. As part of the “Edinburgh Reforms”, the UK will release a new green finance strategy early this year and, additionally, launch a consultation for the oversight of ESG ratings providers to promote “consistent standards” and transparency.  Read more

Americas

The US Federal Reserve consults on a climate-risk framework for banks

The United States Federal Reserve is seeking feedback on a high-level climate-risk framework for the largest financial institutions (over $100 billion in total assets). Eligible entities will be bound by principles for the sound management of physical risks and transition risks in terms of climate change. These principles cover internal policies and procedure, risk management, data quality, governance and scenario analysis. The proposed principles are compatible with proposals issued by other federal agencies such as the Federal Deposit Insurance Corporation. Read more

Asia Pacific

The Steering Group chaired announces collaboration with CDP to release climate-related risk disclosure by SMEs

The Steering Group will work together with the Carbon Disclosure Project to strengthen the sustainability reporting regime in Hong Kong, focusing primarily on improving data quality and accessibility. The collaboration has led to the first cross-sector template for SMEs reporting in Hong Kong for the first time. The template has three different modules to allow for a range of granularity in reporting based on company size and complexity. Read more

Other News & Resources

• EBA publishes Roadmap to Sustainable Finance. Read more
• ISSB announces guidance and temporary relief for Scope 3 emissions disclosures. Read more
• The Federal Acquisition Regulatory Council (FARC) will extend the comment period for the proposed rule on Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk by 30 days. Read more

Have we missed anything?
ESG Book manages the world’s largest repository of sustainability reporting provisions with over 3,400 regulations across 71 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