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February 01, 2019

IOSCO published a consultation report that proposes 11 recommendations for emerging market member jurisdictions to consider when issuing regulations or guidance regarding sustainable financial instruments. The Growth and Emerging Markets Committee (GEMC) of IOSCO believes that its recommendations will benefit both issuers and investors by improving the consistency of regulation of sustainable finance in emerging markets. Comment period on the consultation ends on April 01, 2019.

Among other things, the recommendations propose requirements for disclosure of material Environmental, Social, and Governance (ESG) specific risks, aimed at enhancing transparency. The consultation report explores the trends and challenges that influence the development of sustainable finance in emerging capital markets. It also provides an overview of the initiatives that regulators, stock exchanges, policy makers, and other key stakeholders in emerging markets have undertaken in this area. The report identifies the prerequisites for creating an ecosystem that facilitates sustainable finance, such as an appropriate regulatory framework and fit-for-purpose market infrastructure, reporting and disclosure requirements, governance and investor protection guideline,s and mechanisms to address needs and requirements of institutional investors.

The proposed recommendations fall into the following categories:

  • Integration by issuers and regulated entities of ESG-specific issues in their overall risk appetite and governance (Recommendation 1)
  • ESG-specific disclosures and reporting (Recommendation 2)
  • Data quality (Recommendation 3)
  • Definition of sustainable instruments (Recommendation 4)
  • Eligible projects and activities (Recommendations 5 to 9)
  • Integration of ESG-specific issues into the investment analysis, strategies, and overall governance of institutional investors (Recommendation 10)
  • Building capacity and expertise for ESG issues (Recommendation 11)

 

Related Links

Comment Due Date: April 01, 2019

Keywords: International, Banking, Securities, Sustainable Finance, ESG, Regulatory Framework, IOSCO

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