The pace of the new climate, sustainable business rules will not stop

LONDON, Dec 20 (Reuters) – Last year was the busiest on record for climate and sustainability standard-setting, and there is no letup in 2023 as policymakers adjust the network around flaky or fraudulent corporate behavior.

Since Canada a South Africathe proposed or implemented rules covered everything from driving transparency in corporate supply chains to defining what an environmentally friendly activity looks like.

Among the most prolific lawmakers is the European Union, which began rolling out sustainability rules for asset managers as part of a series of dictates aimed at ensuring the bloc hits its climate targets and helps control global warming.

Regulatory scrutiny has also expanded to include investment ratings and the labeling of sustainable investment funds.

BECAUSE IT IS IMPORTANT

Rising regulatory concerns about ‘greenwashing’, or inflated claims about the climate, comes as trillions of dollars flow into companies and investments touting their environmental, social and governance (ESG) credentials.

With so much money staked on companies doing well on ESG, and with the need to ensure that laggards are held accountable so the world can meet its broader climate and sustainability goals, regulators are pushing for market railings. be clearer.

Without them, it has traditionally been difficult to punish bad practices, although in 2022 that began to change. In the United States, for example, both Goldman Sachs Asset Management and BNY Mellon Investment Adviser were fined for ESG breaches.

German asset manager DWS (DWSG.DE) Meanwhile, its offices were raided and its chief executive resigned following allegations that it misled investors about its ESG investments.

With stricter rules, companies and financial firms will be forced to adopt higher standards and be more transparent about their ESG efforts, for fear of censorship, be it public, regulatory or even legal.

Among the companies that faced legal or regulatory challenges in the last year was the mining company Glencore (GLEN.L)the Dutch subsidiary of Air France KLM (AIRF.PA) and the directors of the energy company Shell (SHELL).

Question marks over a company’s ESG credentials are also beginning to gain the attention of activist investors, eager to take advantage of the ESG money wall in the market to affect boardroom change.

WHAT DOES IT MEAN FOR 2023?

During 2022, the European Union, United States and the new global International Sustainability Standards Board (ISSB) set climate-related disclosure rules for companies to end in 2023, meaning corporations can no longer hide behind an unregulated patchwork of voluntary standards.

ESG rules will also become mandatory instead of optional in 2023, and the EU is expected to publish 200 pages of guidance in January alone to help market participants use its green taxonomy, a list of environmentally friendly activities. and other ESG rules.

With so many rules popping up, a key task for regulators globally will be how they all sync up, making it easier for companies to run and ensuring bad practice in one area doesn’t spill over into another.

ISSB’s work will also be key in driving a global baseline for climate-related information shared by companies with investors, making it easier to compare corporate efforts around the world.

However, this is likely to only happen in stages after 2023 as there are no global taxonomies or rules on what constitutes sustainable investing.

explore the Reuters news roundup that dominated the year, and the prospects for 2023.

Edited by Anna Driver

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