Global Regulators Tighten ESG Reporting Standards: UK, US, and EU Take Action.

Greetings, ESG Innovators and Sustainability Champions! ??

Welcome to our cutting-edge newsletter on global ESG regulatory developments!

In this edition, we're bringing you the latest updates from the forefront of sustainable finance and corporate reporting. We'll explore the UK's bold move to regulate ESG ratings providers, the SEC's steadfast defense of climate disclosure rules, and the EU Commission's crucial guidelines for implementing the Corporate Sustainability Reporting Directive. These developments are reshaping the ESG landscape, driving transparency, and setting new standards for responsible business practices. Join us as we navigate these pivotal changes that are transforming the future of sustainable finance and corporate accountability!

UK to Regulate ESG Ratings Providers in 2025, Boosting Transparency in Sustainable Finance

The UK government plans to introduce legislation in 2025 to regulate ESG ratings providers, as announced by Chancellor Rachel Reeves and confirmed by HM Treasury. This move aims to enhance transparency in sustainable finance and solidify the UK's position as a leader in this field.

Key points:

1. ESG ratings providers will be placed under the Financial Conduct Authority's supervision.
2. The initiative responds to growing demand for ESG integration in investments and the need for regulatory oversight.
3. The regulation aligns with IOSCO's 2021 recommendations for improving transparency and preventing conflicts of interest.
4. It follows similar moves by other jurisdictions, including the EU's recent agreement to regulate ESG ratings providers.
5. The UK previously launched a voluntary code of conduct for ESG ratings providers and announced a consultation on regulation in its Green Finance Strategy.
6. The new regulation aims to boost growth, support a cleaner economy, and ensure fair treatment of companies in critical sectors.

SEC Defends Climate Disclosure Rule in Court, Emphasizing Investor Protection

The U.S. Securities and Exchange Commission (SEC) has filed a brief with the Eighth Circuit Court of Appeals defending its new climate reporting rule. Key points include:

1. SEC argues the rule provides information directly relevant to investment value and is within its authority.
2. The Commission states climate-related risks significantly affect companies' financial performance, but current reporting is inconsistent.
3. The rule, released in March, requires public companies to disclose climate risks, plans, and in some cases, greenhouse gas emissions.
4. It faces legal challenges from Republican state attorneys general and business groups, claiming it's too burdensome and exceeds SEC authority.
5. SEC paused implementation pending legal review but continues to defend the rule vigorously.
6. The Commission cites investor demand for consistent, comparable climate-related information.
7. SEC emphasizes the rule is about protecting investors, not regulating climate change or environmental policy.

The SEC maintains that the rule is designed to provide important information for informed investment decisions, addressing concerns about costs and authority.

EU Commission Releases Guidelines for Corporate Sustainability Reporting Directive Implementation

The European Commission has published detailed guidelines on implementing the Corporate Sustainability Reporting Directive (CSRD), which introduces new sustainability reporting requirements for various companies.

Key points:

1. Scope: Applies to large undertakings, listed SMEs, parent companies of large groups, and certain third-country entities with significant EU operations.
2. Phased implementation:
3. Requirements:
4. Third-country entities with substantial EU business must publish reports adhering to ESRS.
5. Exemptions available for subsidiaries included in parent company reports and temporary opt-out for SMEs until 2028.
6. EU Commission to adopt sustainability assurance standards by 2026.

The CSRD aims to enhance corporate transparency and accountability in sustainability practices across the EU, ensuring reliable and comprehensive sustainability information for stakeholders.

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This newsletter was curated by Jeevan from Newtral. Reach out to him at jeevan@newtral.io or on LinkedIn.