{"id":3379,"date":"2022-02-14T06:28:17","date_gmt":"2022-02-14T06:28:17","guid":{"rendered":"http:\/\/eos.co.id\/main\/?p=3379"},"modified":"2022-02-14T06:28:19","modified_gmt":"2022-02-14T06:28:19","slug":"what-might-global-esg-regulation-look-like-in-2025","status":"publish","type":"post","link":"https:\/\/eos.co.id\/main\/uncategorized\/what-might-global-esg-regulation-look-like-in-2025\/","title":{"rendered":"What might global ESG regulation look like in 2025?"},"content":{"rendered":"\n

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February 14, 20221h7tj<\/p>\n\n\n\n

Source >>><\/a><\/h3>\n\n\n\n
Following COP26 and the broader discourse around green finance, there is increasing pressure on governments and financial organisations to introduce regulation on Environmental, Social and Governance (ESG) issues.<\/h5>\n\n\n\n
In fact, in 2021 alone, at least 34 regulatory bodies across 12 markets undertook official consultations on ESG (MSCI 2021).<\/h5>\n\n\n\n
This flurry of interest compliments current guidelines on ESG disclosure and investing practices.<\/h5>\n\n\n\n
Moreover, guidelines and proposed regulations are crucial for the financial sector. In fact, over 60% of initiatives planned globally before 2025 chose \u2018financial entities\u2019 as the holders of reporting responsibility (MSCI 2021).<\/h5>\n\n\n\n
Initiatives like the Taskforce on Climate-related Financial Disclosures have also improved the availability and quality of climate-related financial information.<\/h5>\n\n\n\n
Understanding the trajectory of global ESG regulation is crucial for forward-looking asset managers.<\/h5>\n\n\n\n
This article will consider three examples of current and upcoming regulations or guidance that will likely be active by 2025.<\/h5>\n\n\n\n
EU: SFDR (Sustainable Finance Disclosure Regulation)<\/strong><\/h5>\n\n\n\n
General Summary:<\/strong><\/h5>\n\n\n\n
The SFDR is the European Union\u2019s (EU\u2019s) pioneering mandatory regulation for asset managers and other financial market participants on Environmental, Social and Governance (ESG) disclosure.<\/h5>\n\n\n\n
It is the first step in the EU\u2019s standardisation of environmental disclosure frameworks for asset managers.<\/h5>\n\n\n\n
The first level of the SFDR came into place in March 2021 as part of the European Commission\u2019s (EC) Sustainable Finance Action Plan.<\/h5>\n\n\n\n
Level 1 considers entity level <\/strong>disclosures of sustainability consideration.<\/h5>\n\n\n\n
This level means financial market participants will provide information on their methods for identifying and managing adverse sustainability impacts. It includes both impact measurements (known as principle adverse impact indicators<\/strong>) and risk considerations.<\/h5>\n\n\n\n
As opposed to simply considering a fund \u2018sustainable\u2019 or not, the SFDR divides funds into three categories:<\/h5>\n\n\n\n
\u2018Dark Green\u2019 Article 9 funds: direct positive sustainability impact.<\/h5>\n\n\n\n
\u2018Light Green\u2019 Article 8 funds: promote environmental or social efforts.<\/h5>\n\n\n\n
\u2018Grey\u2019 Article 6 funds: Consider risks as part of the investment process or are non-sustainable funds.<\/h5>\n\n\n\n
Level 2 will include product level disclosures.<\/h5>\n\n\n\n
FMP\u2019s will need to provide annual reports via detailed and standardised templates on the sustainability criteria of their financial products.<\/h5>\n\n\n\n
Level 2 of the SFDR will come into force in July 2022.<\/h5>\n\n\n\n
Regulator: European Commission<\/strong><\/h5>\n\n\n\n
Reporting entity: Financial Market Participants <\/strong>(this includes institutional investors and asset managers).<\/h5>\n\n\n\n
Stringency: Mandatory.<\/strong><\/h5>\n\n\n\n
Who\u2019s affected:<\/strong> Financial market participants operating in the European Union.<\/h5>\n\n\n\n
USA: Climate-related financial risks and insurers (planned)<\/strong><\/h5>\n\n\n\n
General Summary:<\/strong><\/h5>\n\n\n\n
MSCI\u2019s report on ESG trends for 2022 included the expectation that the Federal Insurance Organisation (FIO) are planning regulatory measures to ensure the inclusion of climate-related risks.<\/h5>\n\n\n\n
Initiated by two executive orders (14,800 & 14,030 \u2013 2021), the FIO is tasked with assessing climate-related gaps in the insurance market and their impact on financial stability in America (FIO 2021).<\/h5>\n\n\n\n
These orders expect a current risk-assessment gap for environmental issues that undermine economic resilience.<\/h5>\n\n\n\n
The FIO has identified three priorities for tackling climate risk (FIO 2021):<\/h5>\n\n\n\n
Supervision and regulation:<\/strong> Assess the climate-related regulatory gaps on insurers and their potential to impact US financial stability.<\/h5>\n\n\n\n
Markets and mitigation:<\/strong> Assess where climate issues will impact insurance coverage most and how the FIO can create resilience.<\/h5>\n\n\n\n
Insurance sector engagement: <\/strong>How can the insurance sector help to achieve climate-related goals.<\/h5>\n\n\n\n
A request for public information with significant contributions from asset managers and investors solidified these goals and the FIO\u2019s role as a leader in achieving them.<\/h5>\n\n\n\n
Further details of the regulation are yet to be announced.<\/h5>\n\n\n\n
Regulator: Federal Insurance Organisation.<\/strong><\/h5>\n\n\n\n
Reporting entity: Financial entities.<\/strong><\/h5>\n\n\n\n
Stringency: To be confirmed.<\/strong><\/h5>\n\n\n\n
Who\u2019s affected: To be confirmed.<\/strong><\/h5>\n\n\n\n
Singapore: Environmental Risk Management Guidelines for Asset Managers<\/strong><\/h5>\n\n\n\n
General Summary:<\/strong><\/h5>\n\n\n\n
In 2020 the Monetary Authority of Singapore (MAS) introduced environmental risk management guidelines for asset managers with discretionary authority over the investment of funds.<\/h5>\n\n\n\n
These guidelines aimed to encourage the management of environmental risks for a resilient portfolio.<\/h5>\n\n\n\n
They highlight the importance of considering climate change and biodiversity loss in risk management (MAS 2020).<\/h5>\n\n\n\n
Moreover, the guidelines focus on these themes in three categories:<\/h5>\n\n\n\n
Physical risk (the impact of resulting events, e.g. extreme weather).<\/h5>\n\n\n\n
Transitional risk (the effect of economic change towards a more sustainable economy).<\/h5>\n\n\n\n
Reputational risk (the negative associations with an asset manager choosing unsustainable investments).<\/h5>\n\n\n\n
MAS\u2019 suggestions include a framework for governance and strategy, research and portfolio construction and analysis for accurate risk management.<\/h5>\n\n\n\n
They also touch on asset managers\u2019 stewardship role (guiding investee companies towards more sustainable business practices) and duty to disclose environmental risk management to stakeholders.<\/h5>\n\n\n\n
Overall the guidelines urge asset managers to consider environmental risks as \u2018crucial\u2019 (MAS 2020).<\/h5>\n\n\n\n
The MAS started engaging with financial institutions on their implementation progress in 2021.<\/h5>\n\n\n\n
Click here to see the guidance in full: https:\/\/www.mas.gov.sg\/regulation\/guidelines\/guidelines-on-environmental-risk-management-for-asset-managers<\/u><\/a><\/h5>\n\n\n\n
The MAS has since launched key green finance initiatives. These include the Green Finance Industry Taskforce (2021), which will likely provide further guidance on environmental disclosure for the financial sector.<\/h5>\n\n\n\n
Regulator: Monetary Authority of Singapore.<\/strong><\/h5>\n\n\n\n
Reporting entity: Product. Financial Entity.<\/strong><\/h5>\n\n\n\n
Stringency: Guidance (not mandatory).<\/strong><\/h5>\n\n\n\n
Who\u2019s affected: Asset managers.<\/strong><\/h5>\n\n\n\n
These three examples illustrate the global breadth of the development of ESG finance regulation.<\/h5>\n\n\n\n
Get in touch to learn more about how you can accurately factor the risks caused by biodiversity loss into your portfolio for the first time.<\/h5>\n\n\n\n
Please note: this article does not constitute financial advice. Policy guidance was accurate at time of writing but may be out of date.<\/em><\/h5>\n","protected":false},"excerpt":{"rendered":"

February 14, 20221h7tj Source >>> Following COP26 and the broader discourse around green finance, there … Continue ReadingWhat might global ESG regulation look like in 2025?<\/span><\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/posts\/3379"}],"collection":[{"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/comments?post=3379"}],"version-history":[{"count":1,"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/posts\/3379\/revisions"}],"predecessor-version":[{"id":3380,"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/posts\/3379\/revisions\/3380"}],"wp:attachment":[{"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/media?parent=3379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/categories?post=3379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eos.co.id\/main\/wp-json\/wp\/v2\/tags?post=3379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}