Featured Product

    ISDA Publishes Verified Carbon Credit Definitions, Issue Other Updates

    January 17, 2023

    The International Swaps and Derivatives Association (ISDA) published standard definitions for the trading of verified carbon credits and submitted its response to the European Supervisory Authorities’ (ESAs) call for evidence on greenwashing. Additionally, ISDA and the Association for Financial Markets in Europe (AFME) published its response to a discussion paper on the Prudential Regulatory Authority’s (PRA) future approach to policy.

    Below are the key highlights of the recent updates:

    • ISDA published standardized documentation for the trading of Verified Carbon Credits (VCCs), as part of a broad effort to support the transition to a green economy by developing robust legal and risk management standards for markets related to environmental, social and governance (ESG) activities. The 2022 ISDA Verified Carbon Credit Transactions Definitions and related template confirmations for spot, forward and options contracts have been developed with the flexibility to support trading of carbon credits across carbon standards and registries. The new standards will be available digitally on ISDA’s MyLibrary electronic documentation platform, enabling ISDA to seamlessly revise and update these documents as market practices evolve. In addition to the voluntary carbon market, ISDA is working to bring greater standardization to the sustainability-linked derivatives (SLD) market. These products embed a sustainability-linked cashflow in a derivatives structure and use key performance indicators (KPIs) to monitor compliance with ESG targets, with incentives to encourage parties to meet their sustainability objectives.
    • Additionally, in its response to call for evidence on greenwashing, ISDA highlights that the current regulatory framework provides for an inconsistent treatment of derivatives and an unclear representation of the role of derivatives in sustainability, exposing them to unwarranted claims of greenwashing. ISDA reiterates its call for specific environmental, social and governance (ESG) classification guidelines to be issued for derivatives and structured products in order to allow financial institutions to implement their ESG obligations without undue regulatory risks, which could otherwise expose firms selling these products to a significant risk of litigation and reputational damage. ISDA further points to the lack of clarity around regulations and methodologies as one major cause of greenwashing. ISDA also elaborates on the structure of sustainability-linked derivatives (SLDs), including ISDA’s related work to encourage adequate disclosure of how SLDs help attain sustainability objectives.
    • Finally, ISDA and AFME, in its response to PRA’s future approach to policy, highlight their support for PRA as an independent regulator and endorse the PRA’s statement that its position as an operationally independent regulator is an important safeguard for the UK financial system. With recent market instability, it is ever more important to maintain stability and predictability of the UK’s regulatory regime, underpinned by the independence of the PRA, which is key to ensuring investor confidence to facilitate market stability, future investment and growth. The associations support the continuation of structured policy developments, built on ongoing dialogue and consultation between policymakers and the industry that delivers the clarity, certainty and predictability that international businesses and investors seek.


    Related Links

    Keywords: International, Banking, Securities, ESG, Carbon Credit, Climate Change Risk, Transition Risk, Greenwashing, Reputational Risk, Disclosures, PRA, AFME, ESAs, ISDA

    Featured Experts
    Related Articles

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806