ISS releases global ESG regulation report

Yasmine Raso

Senior Journalist, Financial Newswire

5 October 2022

The responsible investment division of Institutional Shareholder Services Inc., ISS ESG (Environmental, Social and Governance), has released its newest comparative report on global initiatives to improve the regulatory landscape of sustainable finance.

The report, The Depth and Breadth of Sustainable Finance Regulatory Initiatives: Global Developments in 2022, uses the ISS ESG Regulation Depth and Breadth Index to compare the “number and breadth of initiatives proposed or implemented to date, as well as a qualitative summary of initiatives by region and country”.

The report showed the scope and pace of global sustainable finance regulation implementation had rapidly increased in 2022 across six primary areas, including taxonomies, product standards, disclosures and labelling, management and disclosure of climate risks, management and disclosure of ESG risks, ESG in stewardship, and green bond guidelines.

It also found the European Union continues to lead the charge in the depth and breadth of its regulations, closely followed by Asia’s rising number of new initiatives, and North America and Australia’s improvement of ESG-related regulatory efforts.

“This latest report in our series provides a helpful comparative snapshot of rapidly evolving regulatory initiatives and related objectives, against a challenging backdrop of geopolitical tensions, economic volatility, and the politicization of sustainable finance,” Dr. Maximilian Horster, Head of ISS ESG, said.

“Given these conditions, policymakers may aim to pursue sustainable finance regulation that reconciles policy objectives and fosters economic and energy resilience in line with climate transition goals.”

The report also noted the difficulties of policymakers to consider “the goals of sustainable finance regulation” against the backdrop of economic and geopolitical volatility that has plagued 2022.

“The debate in the European Union about whether nuclear energy and natural gas have a place in green taxonomies is a prominent example of the clash between political and sustainable finance objectives, and of how the politicization of sustainable finance frameworks can create a perceived conflict with broader political and economic national interests,” the report said.

“The year 2022 has been a watershed for regulation mandating climate and ESG reporting by corporate issuers across major capital markets. Jurisdictions such as the EU, the US, New Zealand, Japan, India, China, the Philippines, Taiwan, Chile, and Switzerland have or are developing relevant rules or guidelines.”