IOSCO published a report that examines the sustainable finance initiatives by the securities regulators and the industry. It offers a detailed analysis of the most relevant international initiatives and third-party frameworks and standards related to the Environmental, Social, and Governance (ESG) factors. The report also identifies a number of improvement areas and articulates the need for IOSCO to play a key role in this area. The report finds that lack of consistency and comparability across third-party frameworks could create an obstacle to cross-border financial activities and raise investor protection concerns.
The report highlights three recurring themes that involve multiple and diverse sustainability frameworks and standards—namely, sustainability-related disclosures, a lack of common definitions of sustainable activities, and greenwashing and other challenges to investor protection. The report indicates that many issuers and asset managers operating cross-border may be subject to different regulatory regimes or participate in multiple regional or international third-party initiatives. The wide variety of regulatory regimes and initiatives, often with inconsistent objectives and requirements, may prevent stakeholders from fully understanding the risks and opportunities that sustainable business activities entail. As a next step, to overcome these identified challenges, IOSCO has decided to establish a Sustainability Task Force with a mandate to address transparency and promote investor protection.
The Task Force will work to improve sustainability-related disclosures made by issuers and asset managers, collaborate with international organizations and regulators to avoid effort duplication, enhance coordination of relevant regulatory and supervisory approaches, and conduct case studies and analyses of transparency, investor protection, and other relevant issues within sustainable finance. The key work of the Task Force will be to:
- Improve sustainability–related disclosures by issuers and asset managers. To this end, the Task Force will identify and develop categories of disclosure that are material for investors and that are capable of falling within the supervisory and regulatory competence of securities regulators.
- Assist IOSCO members to identify and address greenwashing and other investor protection concerns. The Task Force would examine categories of disclosure to assess whether industry specific or more broad metrics would provide decision useful information and comparability between different issuers. The Task Force would also engage with the industry, voluntary third-party disclosure standard-setters and other relevant organizations.
- Address relevant issues within sustainable finance. These issues could include transparency issues among ESG data providers, disclosure of methods and governance among credit rating agencies and ESG rating agencies, practices and experiences of asset managers on the use of sustainability-related factors in investment decisions processes, and risks of greenwashing in the market for sustainable investment products.
Keywords: International, Banking, Securities, ESG, Climate Change Risk, Sustainable Finance, Transparency, Disclosure, Systemic Risk, Sustainability Task Force, Credit Rating Agencies, IOSCO
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
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.
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