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
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