Monthly Updates on Regulatory Developments in Environmental, Social, and Governance (ESG) Policies within Financial Services Sector

Monthly Updates on Regulatory Developments in Environmental, Social, and Governance (ESG) Policies within Financial Services Sector

The financial sector is witnessing a significant shift towards sustainability, with regulatory bodies worldwide taking steps to combat greenwashing and promote transparency.

The European Securities and Markets Authority (ESMA) has published Progress Reports on greenwashing in the financial sector, aiming to address misleading practices and ensure that investments are truly sustainable.

The UK Financial Conduct Authority (FCA) has taken action by publishing final rules and guidance on Sustainability Disclosure Requirements (SDR) and investment labels. This move is aimed at improving the quality of information available to investors about the sustainability of their investments.

Across the globe, the Australian Competition and Consumer Commission (ACCC) has authorized the Australian Sustainable Finance Institute (ASFI) to collaborate on sustainable finance initiatives in Australia. The collaboration is subject to conditions to prevent anti-competitive behavior.

In the UK, the FCA's multi-firm review of climate reporting highlighted progress in integrating climate change risks but noted challenges with data availability and reporting complexity. The FCA has proposed new guidance on the anti-greenwashing rule to address these issues.

The UK government has opened a consultation on a UK Green Taxonomy, aiming to create a common language for sustainable activities. Meanwhile, the government will not pursue a UK Taxonomy and will focus on the delivery of its commitments on transition plans and sustainability reporting standards.

The Transition Plan Taskforce has published the final version of its Disclosure Framework, providing guidance for companies on how to disclose their transition plans towards a more sustainable future.

On the other side of the world, the Australian Securities and Investments Commission (ASIC) addressed climate-related risks in the financial system, releasing a report that outlines the steps financial institutions should take to manage these risks.

The European Commission has published a sustainable finance package, which includes the adoption of the European Sustainability Reporting Standards (ESRS). The ESRS aim to provide a consistent and comparable basis for companies to report on their sustainability performance.

The Network of Central Banks and Supervisors for Greening the Financial System published short-term scenarios representing the first publicly available framework designed to analyze the potential near-term impacts of climate policies and climate change on financial stability and economic resilience.

The Taskforce on Nature-related Financial Disclosures (TNFD) has published recommendations, providing guidance for companies to disclose and manage their exposure to nature-related risks and opportunities.

The Prudential Regulation Authority (PRA) has also joined the movement, publishing a Consultation Paper on enhancing banks' and insurers' approaches to managing climate-related risks.

The Financial Conduct Authority and the Prudential Regulation Authority have launched consultations setting out proposals to introduce a new regulatory framework on diversity and inclusion in the financial sector.

The current heads of the Australian agencies involved in ESG developments over the last six months are Gina Cass-Gottlieb as Chair of the ACCC, Justice Debra Mortimer as a Federal Court of Australia judge who handles relevant ESG cases, and Joseph Longo as Chair of the Australian Securities and Investments Commission (ASIC).

In a significant international development, the International Court of Justice (ICJ) issued a judgment affirming states' obligations to protect the climate from greenhouse gas emissions.

These developments demonstrate a global commitment to sustainable finance and a shared understanding of the urgent need for action against greenwashing and climate change.