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.
Keywords: Europe, EU, Banking, Insurance, Securities, Sustainable Finance, Climate Change Risk, ESG, Annual Report, COVID-19, Disclosures, Reporting, Taxonomy, IPSF, EC
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleCSSF Publishes Guidance on COREP and FINREP Reporting
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.