ESG efforts have seen three-fold increases over the last decade. With modern technology and the need for sustainable investments, companies and industries are striving towards an environmentally-conscious market that helps cut down carbon emissions and holds industries accountable for an eco-friendlier world, promotes diversity & inclusion and employee well-being, and creates transparency into management practices.
While industries make conscious efforts to improve ESG efforts, it has led to a placebo effect, in the forms of false and limited reporting that focuses heavily on carbon disclosures and omits other ESG factors. Other issues like companies overstating sustainable investing activities lead to misleading clients. The solution to curbing greenwashing issues may lie within extending government regulations.
The need for government regulations raises questions like –
- Who and what shall and can be regulated?
- What will and won’t be reported?
- Would these rules create entry barriers?
Regulations and Efforts
With increasing need for change, many organizations are taking the steps towards a better tomorrow.
North American Actions
North America continues to lead ESG standard adoptions. The Federal Insurance Office of the US Department of Treasury released a request for information on climate-related risks faced by the insurance sector, published by the WMO and IPCC . These reports would help banks and insurance firms with required data necessary to model the climate change impacts on the financial sector.
The Canadian government made a commitment to cut greenhouse gas emissions by 40% to 50% by 2030. The U.S. Securities and Exchange Commission (SEC), proposed mandatory climate risk reporting to ensure better climate risk disclosures, consistency, comparability of information and equipping investors with “decision-useful” levels of qualitative and quantitative data. The U.S. Department of the Treasury launched new efforts on climate-related financial risks to focus on assessing climate issues and supervise shortcomings, regulate insurance firms and more.
Countries in Europe are making changes to meet sustainable investing guidelines. Switzerland became the first country in Europe to make climate disclosure mandatory. The EU (European Union) set goals to achieve climate neutrality by 2050, increasing the goal of reducing greenhouse gases emission by 40% by 2030 to now 55%.
Other initiatives include those like the UK regulators launching guidance to help prevent misleading ESG funds, and the European Investment Bank (EIB) creating a Climate and Environment Advisory Council.
Latin American Actions
In South America, Brazil, Chile, Argentina, and Colombia are leading the green initiative and transformation in terms of polices and laws. Chile will make ESG reports mandatory for companies to be included in their annual reports, and intends to ban single-use plastic. Argentina will pave the way as a pioneer for the prohibition of salmon farming.
Other initiatives in the area include Amazon partnering with The Nature Conservancy to save Brazilian rainforests which will help omit 10 million metric tons of carbon dioxide from the environment. The S&P Dow Jones Indices and Latin American exchange Brazil, Bolsa, Balcão (B3) launched the S&P/B3 Brazil ESG Index that aims to provide investors with exposure to the Brazilian equities market while providing a boost in ESG performance.
Asia Pacific Actions
In the Asia Pacific regions, the Philippine SEC moved to make sustainability reports mandatory for all companies by 2023, Japan made climate disclosures mandatory for listed companies. Efforts in the area include Australia’s Clean Energy Regulator will move to launch Carbon Exchange to be accomplished by 2023. PWC Australia also moved to form an advisory group that will comprise of sustainability experts that will guide ESG efforts.
In China, Hong Kong Exchange and Clearing Limited (HKEX) announced a new agreement in partnership with Guangzhou Futures Exchange (GFEX), that will overlook the exchanges to promote sustainability and help in development of the Guangdong-Hong Kong-Macao Greater Bay Area.
Newly, Thailand became the latest country to develop a sustainable finance taxology and ESG disclosure rules.
While many strides are being made to achieve ESG goals, achieving them may get tricky for companies. Evalueserve can help.
We at Evalueserve believe the solution to solving the issues of greenwashing are rooted in the need for more meaningful data that covers metrics spanning environmental, social and governance factors; representing the multiple risks faced by companies and investors.
Evalueserve collects data on over 1,800 ESG indicators. This data goes beyond average topics and includes key social and governance topics which empower us to develop successful insights that help drive investment decisions.