Building Global Consensus on ESG Disclosures

For a long time, financial regulation has been framed around two distinct perspectives – that of financial institutions and that of policymakers and regulators. Firms within the market have often viewed regulation as necessary actions that allow them to operate their business, and when invested in the development of regulation, it has often pertained to financial materiality.      

In contrast, key public stakeholders have regarded regulation to entrench consumer protection, mitigate market volatility, and promote competition. However, with the growing global focus on environment, social, and governance (ESG) requirements and disclosures, we are witnessing an alignment in the objectives of policymakers and firms.

Various global bodies, such as the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB), have tackled the process of building consensus. In support of such efforts, our project focuses on the interoperability of global reporting standards and their application in capital markets across key jurisdictions within the G7 and G20. Increasingly, governments are mandating ESG reporting, with a particular emphasis on environmental disclosures. However, our project seeks to go beyond established norms to uncover the disclosures, regulations, and policies that listing platforms require firms to adhere to, thus allowing us to determine how such requirements align with global reporting standards.

The Significance of Collaboration

As we delve deeper into our project, we are creating a mapping document that will be utilized by a myriad of stakeholders invested and interested in incorporating better sustainability practices into their operations. Consequently, collaboration permeates every facet of our work. First, at the team level, throughout the project, our team has made concerted efforts to synthesize a research approach and methodology that aligns with our client's needs. We have developed a working mapping document and provided key insights to the client through our liaison with internal stakeholders at the Sustainable Investment Research Initiative (SIRI).

Furthermore, collaborating with our colleagues and professors on the Sustainable Investing Research Consulting Project has allowed us to develop a better understanding of our client's needs and how we can leverage our research to catalyst collaborative efforts within the complex and ever-changing global landscape of disclosures. Each team member brings a unique set of skills and expertise to the project, enabling us to effectively meet our client's requirements. Our breadth of experience ranges from central banking to sustainability consulting and regulatory matters.

Key Risks within the Global Landscape

Throughout the project, it has become evident that there are key risks associated with a lack of congruence in ESG disclosures across jurisdictions. Without efforts to map the interoperability of existing standards, jurisdictions may develop their own standards, with varying levels of rigor and applicability. The lack of consensus will result in a fragmented landscape where some countries may focus on the impact of ESG disclosure on firms and their ability to generate value, while others may place a greater emphasis on the broader impact of firm activity on the world and communities at large. Although both aspects hold varying levels of importance for stakeholders and investors, it is increasingly necessary to move past the binary view of ESG reporting as either value-generating or value-detracting, towards a more holistic and integrated approach.

Conclusion

In conclusion, at this phase of the project, the importance of collaboration has remained paramount. Whether through our contribution to the development of a global consensus on ESG disclosures or collaborating amongst ourselves to improve our ability to synthesize large datasets, develop client relationships, and manage multiple stakeholders, the project has fostered a collaborative environment. Additionally, it has allowed me to utilize and apply my existing regulatory background, focusing on regulatory mapping, horizon scanning, and consumer protection, within a global context.