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August 11, 2022

Regulatory Round-up: Calls for ESRS and ISSB alignment, China’s green bond principles

Securities regulators, sustainable finance groups and investors have called for a closer alignment between the European Sustainability Reporting Standards and those of the International Sustainability Standards Board. In their feedback to the European Financial Reporting Advisory Group’s consultation on ESRS drafts, the European Securities and Markets Authority, Eurosif and others have stressed the importance of interoperability between standards. Esma noted how the structure used in the ISSB standards, and which was the starting point of the ESRS, has been “re-worked by [Efrag] into a more complex architecture.” Esma also would like a closer alignment between the concept of financial materiality in ESRS and that of enterprise value creation in the ISSB standards.

The UN-backed Net-Zero Asset Owner Alliance has asked the EU to prioritise the inclusion of specific reporting metrics for the oil and gas, aviation, steel and other energy-intensive sectors in the European Sustainability Reporting Standards, given policy makers’ “ambitious timeline” for the standards. The NZAOA, which represents 74 investors with $10.6tn in assets, also called for alignment and “full interoperability” with standards designed by the International Sustainability Standards Board.

An analysis of 38 UK pension schemes and other asset owners showed that few engage on sustainability issues with beneficiaries, suggesting that the Financial Reporting Council‘s stewardship code should be used to engage with pension scheme members in addition to its application to engage with asset managers. The research was conducted by fintech company Tumelo.

China has released new green bond principles in alignment with international standards such as those by the International Capital Market Association and the Climate Bonds Initiative. The principles have stricter rules on the use of proceeds and recommend independent third-party certification on the bonds.

Singapore’s central bank will align its future sustainability disclosures with new international standards, including those of the International Sustainability Standards Board, said Ravi Menon, managing director of the Monetary Authority of Singapore presenting the institution’s second sustainability report. This is already aligned with recommendations by the Task Force on Climate-related Financial Disclosures.

A service from the Financial Times