Regulatory Round-up: UK Financial Reporting Council works on ESG; UAE looks at sustainable finance regulation
The UK Financial Reporting Council has updated its “statement of intent” on ESG, setting out problematic areas on which it will focus and its plans to engage with companies. The FRC says it will work to improve the efficacy of reporting so that corporate stakeholders can access information in a timely and succinct manner, review the corporate goverancne code and require actuaries to include climate and other ESG risks in their analyses, among other actions.
A stakeholder group of the European Securities and Markets Authority is urging EU watchdogs to address the issue of “green-bleaching” alongside any potential legislation to counter greenwashing. Green-bleaching refers to the decision by financial market participants not to claim their products or services have certain ESG characteristics in order to avoid extra regulation or legal risks. The watchdog’s Securities and Markets Stakeholder Group has said further clarity on terminology such as “green”, “ESG”, “sustainable” and “impact investing” was needed.
The three European supervisory authorities have urged the European Commission to provide more clarity on how companies should report their materiality assessments part of the first set of requirements under the European Sustainability Reporting Standards framework, following its release last November. Under the proposed rules, companies will be required to carry out a materiality assessment, aimed at determining which sustainability issues are most critical to their business model. The European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority has said consistency of this materiality assessment should be improved so that the process is aligned across the different sets of standards.
As the EU debates the finer details of its proposed Corporate Sustainability Due Diligence Directive, Global Witness has released a report claiming Dutch dredging giant Royal Boskalis Westminster “dodged environmental and social due diligence” when signing a contract to participate in the construction of the New Manila International Airport, in the Philippines. The non-governmental organisation says a strong EU due diligence law would “help prevent corporate complicity”. Boskalis contests the accusations and says that its due diligence commitments are monitored and audited every quarter by independent consultants.
The Federal Trade Commission, the US consumer protection agency, has extended its deadline to collect feedback on potential changes to guidelines on environmental marketing claims, which might affect the use of terms such as “recyclable”, “organic”, and “sustainable”. Last December, the FTC announced it intended to update and potentially tighten guidelines to reflect increasing consumer demand for environmentally friendly products. Any interested party will now have an additional 60 days, until April 24, to provide comments.
Regulators in the United Arab Emirates have closed their consultation on a regulatory framework for sustainable finance. The Financial Services Regulatory Authority
and the Registration Authority of Abu Dhabi Global Market were seeking feedback on an initial draft of the framework and said that they anticipate future proposals will consider the inclusion of climate into risk management and governance processes. The ADGM also said that it is working with other UAE authorities to develop a green taxonomy.