There are no universal standards for how companies can measure ESG. But there are (at least) 13 voluntary global standards.
According to Forbes, 2020 saw more than $47 billion swept into ESG funds and stocks in the US alone. That’s double the amount of the last five years combined.
Now the Biden administration is poised to tighten ESG disclosure requirements while the EU is rolling out a tsunami of mandatory ESG obligations.
The CFA Institute is working towards a GIPS-style standard for ESG and just recently the IFRS Foundation set up a working group for global ESG reporting standards.
So, what are the big regulatory changes for ESG this year?
- Non-Financial Reporting Directive (NFRD): certain companies will need to disclose new ESG data
- Sustainable Financial Disclosure Regulation (SFDR): a standardised set of sustainability disclosures required by asset managers
Emerging initiatives are set to take this further:
- A reporting standard for material ESG related risks
- A more stringent EU Green Bond standard
- Adoption of mandatory Task Force on Climate-Related Financial Disclosures (TFCD) reporting