EC Publishes Report on Activities of Sustainable Finance Platform
EC published the first annual report of the International Platform on Sustainable Finance (IPSF). The report provides an overview of the work done over the previous year and outlines the crucial role of sustainable finance in the context of the impact of the COVID-19 pandemic. The IPSF work is focused on developing Common Ground Taxonomy, developing standards and labels for sustainable finance products, and improving climate-related disclosure. The report highlights that significant gaps still exist in the quality and comparability of environmental-related information disclosed by companies. Thus, most IPSF members with regulatory regimes are revising them while those with voluntary-based approaches are considering a shift to hard law.
The report presents an overview of the main characteristics of member jurisdictions' sustainable finance tools in three key focus areas of IPSF: taxonomies, standards and labels, and disclosures. It underlines the main commonalities and divergences in IPSF jurisdictions. Sustainable finance markets have grown massively in volume and in diversity during the last years, but their growth is still far from sufficient to achieve the targets. The report notes that the policy tools on which the IPSF work focuses have the capacity to be very efficient to further scale up sustainable finance:
- The development of green taxonomies within the IPSF membership is nascent, but uptake potential is promising. Many IPSF jurisdictions are considering developing a taxonomy and the potential for comparability in this area is significant. IPSF initiated a working group on taxonomies that will work toward a “Common Ground Taxonomy,” highlighting the commonalities between existing taxonomies. This Common Ground Taxonomy will enhance transparency about what is commonly green in member jurisdictions and contribute to scale up cross-border green investments significantly.
- More and more jurisdictions are developing standards and labels for sustainable financial products, with regulations and guidelines, to provide transparency and clarity and address the risk of greenwashing. IPSF will keep monitoring market developments regarding standards and labels and could envisage the creation of a dedicated working group in the near future.
- In recent years, environmental-related disclosure has improved considerably and a majority of IPSF members have already set mandatory regulatory requirements. Nonetheless, there are still significant gaps notably in the quality and comparability of information disclosed to meet the needs of investors. In this light, most IPSF members with regulatory regimes are revising them while those with voluntary-based approaches are considering a shift to hard law. To ensure that these developments are coordinated and coherent, IPSF is about to launch a working group on corporate environmental-related disclosure. This working group will facilitate the exchange of views and information on national and international policy and regulatory developments regarding environmental-related reporting and will support further alignment of disclosure requirements across IPSF member jurisdictions.
The analysis of this report constitutes the basis for further in-depth work within the IPSF to facilitate comparability and convergence in approaches, in particular the creation of two working groups on taxonomies and disclosure and possibly, in the future on standards and labels. While green financial markets are growing, more work needs to be done to meet environmental objectives, especially to facilitate green recovery following the pandemic. To this end, IPSF created a working group on taxonomies, co-led by the EU and China, to help enhance transparency for investors and facilitate cross-border green investments. The report points out that continued efforts will ensure that jurisdictions continue to develop regulatory tools to better harness the resources of the financial system in the transition to a sustainable future.
Related Links
Keywords: Europe, EU, Banking, Insurance, Securities, Sustainable Finance, Climate Change Risk, ESG, Annual Report, COVID-19, Disclosures, Reporting, Taxonomy, IPSF, EC
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
