11 September 2022, Mumbai:
The complex landscape of conflicting sustainability reporting frameworks and standards that direct businesses and investors in ESG disclosure may soon become more apparent. In November, Glasgow will play host to COP26, the 26th U.N. Climate Change Conference.
The International Sustainability Standards Board will be established by the time it starts by the IFRS Foundation, which is in charge of setting international accounting standards. The new ISSB will advise businesses on what sustainability disclosures to include in their financial statements to inform investors better.
Overview of the EU framework
A whole alphabet soup of regulations is coming out of the EU this year, potentially significantly altering the landscape of sustainable investment in Europe. These regulations include SFDR, CSRD, and green taxonomy. The EU surpassed all in developing an international sustainability policy in 2018 with the release of its sustainable finance action plan.
Making investments in the environment, society, and government more transparent and improving transparency was vital to that plan. The Sustainable Finance Disclosure Regulation, or SFDR, resulted from that.
The US is starting to take its efforts to regulate steering investments toward more ESG-friendly initiatives, while Europe is setting the example by prioritizing a sustainable finance system at the top of its agenda.
Although there are a variety of ESG regulatory frameworks in the Asia Pacific (APAC), general trends point to better data and disclosures. "Although there aren't any explicit new laws in place right now, the asset management sector has to take action right away to prepare for the influx of data on climate risk that it will soon receive for all assets it manages and the rising need for climate-related disclosures.
Concerns around ESG
Asset managers should take into account a more comprehensive ESG approach by putting in place an operational framework with governance and supervision at its heart, including suitable monitoring and surveillance controls and procedures linked to ESG, and using data that is consistent, similar, and trustworthy to calculate the return to shareholders.
The TCFD framework will be the foundation for the SEC's upcoming climate-related disclosure requirements, which are expected to be extensive, industry-specific, and probably obligatory. To assure regulatory readiness and facilitate the transition to the forthcoming wave of regulation, asset managers should take proactive actions.
The new task for supply chain managers in the textile and footwear sectors is to ensure that their suppliers adhere to ESG criteria, particularly those that assess workers' rights and working conditions.
Concerns about exploitation and forced labor are rising, even though this problem is not new for the apparel/clothing and footwear industry—it has been over 25 years since campaigners successfully pressed Nike to address working conditions for women at its suppliers' factories.
Finer Details
Forcible labor and other aspects of ESG are becoming significant compliance concerns for many large firms due to increased pressure from NGOs, regulations in the UK, California, and planned legislation in New York, as well as these three states' laws.
Investors and activists are pressuring big firms to report and reduce the greenhouse gas (GHG) emissions, air, water, and other effects caused in their supply chains due to growing worries about climate change and other environmental consequences.
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