Global Watchdog Takes on Greenwashing with ESG Rating Advice | Business and Economy News


A global securities watchdog plans to publish its first regulatory guidelines for companies that assess business environment, society and governance (ESG) performance.

Global securities watchdog plans to release its first regulatory guidance for reviewers of corporate environmental, social and governance (ESG) performance in July to allay growing concerns among asset managers about benchmarks overestimated green.

Concern over so-called greenwashing has grown as more investments are funneled into climate-friendly funds, resulting in a booming market for ratings on how different companies address ESG challenges.

Ashley Alder, chair of IOSCO’s body of securities regulators from the United States, Europe and Asia, says many countries do not have rules for ESG assessors.

“Many on the buy and sell side have been very clear about how confusing the multiplicity of different ESG rating choices can be, again raising serious questions about relevance, reliability and greenwashing,” said Alder at City & Financial’s City Week event on Wednesday. .

“We are now working on ways to ensure better transparency and clearer definitions. Our work will likely involve advice to service providers and rating agencies, as well as recommendations to regulators on how to deal with potential conflicts of interest.

IOSCO – the International Organization of Securities Commissions – plans to publish a report in mid-July.

The watchdog also wants asset managers to incorporate more meaningful climate considerations into their risk management, as the companies they invest in face more stringent ESG disclosure rules.

“This is essential for providing quality information to end investors,” Alder said.

IOSCO is working with the International Financial Reporting Standards (IFRS) Foundation on setting up a new body by November to draft mandatory global standards for corporate climate change disclosures.

IOSCO members such as the United States and the European Union will continue to work on their own disclosure rules, creating some differences, Alder said.

It is therefore essential that these national approaches become fully interoperable with the global benchmark being developed by IFRS to avoid conflicts and the creation of more “noise” in the system, Alder added.

“We cannot just work in jurisdictional silos when the climate emergency does not respect national borders,” he said. “Global investors need global comparability. “

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