There is growing demand for better ESG disclosure across sectors. Voluntary disclosure of information on environmental, social and governance (ESG) issues has been taking place for decades. However, recent years have seen increased stakeholder demand for more consistent, granular, and comprehensive disclosure of information relevant to ESG factors. This has occurred across various industries, including the financial industry. Financial institutions, investors, regulatory authorities and international institutions increasingly recognize that ESG factors can have a potentially significant impact on business value and risk, as well as systemic risk, leading to a heightened focus on ESG disclosure.
There are multiple frameworks and expectations, with more on the way. While a proliferation of reporting frameworks in past decades has stimulated innovation in disclosure practices, the rapid mainstreaming of ESG issues in financial markets creates a pressing imperative for consolidation.The lack of a recognized and uniform framework makes it difficult to achieve comparability. Multiple frameworks can lead to confusion and a risk of greenwashing. Furthermore, the landscape of ESG disclosures by corporates, upon which financial institutions must rely in order to comply with evolving regulatory requirements, is similarly inconsistent and fragmented.
This paper summarizes key internationally recognized ESG disclosure frameworks, as well as evolving regulatory approaches in major jurisdictions. The authors strongly encourage the relevant international standard setting bodies to take practical steps in the coming months towards a harmonized cross-sectoral ESG disclosure framework.