Abstract
Sustainable finance regulation, a new type of regulation, preoccupied by ad hoc concerns and pursued by novel instruments is emerging around the world. Sustainable finance regulation itself closely follows the rise of Environmental, Social and Governance (ESG) markets, which gained momentum after the conclusion of the Paris Agreement and due to growing investor pressures. While ESG markets have first operated under self-regulatory regimes, greenwashing controversies, growing climate-related risks, and environmental policy objectives have motivated regulatory responses at both national and international levels. Remarkably, the international coordination of these regulatory responses occurs largely outside the sphere of traditional standard-setters. This contribution explores the singularity and extent of the international regulation and coordination of sustainable finance, showing significant differences in the content and process of the international regulation and coordination of sustainable finance.
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Notes
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SEC, Commission Guidance Regarding Disclosure Related to Climate Change (17 CFR PARTS 211, 231 and 241; Release Nos. 33-9106; 34-61469; FR-82).
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Securities and Exchange Act of 1934, sections 12(b)(1) and 13(a).
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The Enhancement and Standardization of Climate-Related Disclosures for Investors, 87 FR 21335.
- 51.
Ibid., at 21464-21468.
- 52.
Ibid., 21468.
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Ibid., 21469-21470.
- 54.
Ibid., at 21335.
- 55.
Ibid., at 21471.
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Ibid., at 21468.
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Esty and de Arriba-Sellier 2023.
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TSC Industries, Inc. v. Northway, Inc., Supreme Court of the United States, 426 U.S. 438, 14 June 1976; Professors Jill E. Fisch, George S. Georgiev, Donna M. Nagy & Cynthia A. Williams, on Behalf of Thirty Securities Law Scholars, Comment Letter Re: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22), 6 June 2022, https://www.sec.gov/comments/s7-10-22/s71022-20130354-297375.pdf.
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Deacon and Litman 2023.
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Busch 2021.
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- 64.
Environmental, Social, and Governance Disclosures for Investment Advisers and Investment Companies, 87 FR 36654 (to be codified in 17 CFR Part 200, 230, 232, 239, 249, 274, and 279); Investment Company Names, 87 FR 36594 (to be codified in 17 CFR Parts 232, 270 and 274).
- 65.
Commission Delegated Regulation (EU) 2021/1253 of 21 April 2021 amending Delegated Regulation (EU) 2017/565 as regards the integration of sustainability factors, risks and preferences into certain organisational requirements and operating conditions for investment firms [2021] OJ L277/1; Commission Delegated Regulation (EU) 2021/1255 of 21 April 2021 amending Delegated Regulation (EU) No 231/2013 as regards the sustainability risks and sustainability factors to be taken into account by Alternative Investment Fund Managers [2021] OJ L277/11; Commission Delegated Regulation (EU) 2021/1256 of 21 April 2021 amending Delegated Regulation (EU) 2015/35 as regards the integration of sustainability risks in the governance of insurance and reinsurance undertakings [2021] OJ L277/14; Commission Delegated Regulation (EU) 2021/1257 of 21 April 2021 amending Delegated Regulations (EU) 2017/2358 and (EU) 2017/2359 as regards the integration of sustainability factors, risks and preferences into the product oversight and governance requirements for insurance undertakings and insurance distributors and into the rules on conduct of business and investment advice for insurance-based investment products [2021] OJ L277/18; Commission Delegated Directive (EU) 2021/1269 of 21 April 2021 amending Delegated Directive (EU) 2017/593 as regards the integration of sustainability factors into the product governance obligations [2021] OJ L277/137; Commission Delegated Directive (EU) 2021/1270 of 21 April 2021 amending Directive 2010/43/EU as regards the sustainability risks and sustainability factors to be taken into account for Undertakings for Collective Investment in Transferable Securities (UCITS) [2021] OJ L277/141.
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Directive (EU) 2022/2464 of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting [2022] OJ L322/15.
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Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups [2014] OJ L330/1, article 1(1).
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European Commission, Guidelines on reporting climate-related information, 17 June 2019, https://ec.europa.eu/finance/docs/policy/190618-climate-related-information-reporting-guidelines_en.pdf, accessed on 13 April 2022. See also Chiu 2022.
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CSRD, article 1(4) and 1(8).
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CSRD, article 1(4) and 1(7).
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HM Government, Greening Finance: A Roadmap to Sustainable Investing, October 2021, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1031805/CCS0821102722-006_Green_Finance_Paper_2021_v6_Web_Accessible.pdf, accessed 13 April 2022, at 16.
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Regulation (EU) 2019/2088, recs 1–3.
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- 74.
International Capital Market Association, Overview and Recommendations for Sustainable Finance Taxonomies, May 2021, https://www.icmagroup.org/assets/documents/Sustainable-finance/ICMA-Overview-and-Recommendations-for-Sustainable-Finance-Taxonomies-May-2021-180521.pdf, accessed 3 May 2022.
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Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 [2020] OJ L198/13.
- 76.
Ibid., article 3.
- 77.
Ibid., articles 10–15.
- 78.
Ibid., article 17.
- 79.
Ibid., article 18.
- 80.
Ibid., articles 10(3)–(6), 11(3)–(6), 12(2)–(5), 13(2)–(5), 14(2)–(5), 15(2)–(5).
- 81.
Ibid., article 10(2).
- 82.
Ibid., article 16.
- 83.
Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives [2021] OJ L442/1.
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Regulation (EU) 2020/852, article 8.
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Ibid., articles 5 and 6.
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Ibid., article 4.
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CSRD, article 1(8); European Commission, Proposal for a Regulation of the European Parliament and of the Council on European green bonds, COM(2021) 391 final, 6 July 2021, article 4.
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See also Climate Bonds Initiative, Climate Bonds Taxonomy, September 2021, https://www.climatebonds.net/files/files/Taxonomy/CBI_Taxonomy_Tables-08A%20%281%29.pdf.
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EU Platform on Sustainable Finance, Public Consultation Report on Taxonomy extension options linked to environmental objectives, July 2021, https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/sustainable-finance-platform-report-taxonomy-extension-july2021_en.pdf.
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EU Platform on Sustainable Finance, Final Report on Social Taxonomy, February 2022, https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/280222-sustainable-finance-platform-finance-report-social-taxonomy.pdf.
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Commission Delegated Regulation (EU) 2022/1214 of 9 March 2022 amending Delegated Regulation (EU) 2021/2139 as regards economic activities in certain energy sectors and Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities [2022] OJ L188/1.
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Prudential Regulation Authority, “Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change”, Supervisory Statement SS3/19 (April 2019), at https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2019/ss319.pdf?la=en&hash=7BA9824BAC5FB313F42C00889D4E3A6104881C44, accessed 3 May 2022.
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Ibid., 4–5.
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Ibid., 5.
- 98.
Ibid., 7–8.
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Sam Woods, Dear CEO: Managing climate-related financial risk – thematic feedback from the PRA’s review of firms’ Supervisory Statement 3/19 (SS3/19) plans and clarification of expectations, 1 July 2020, https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2020/managing-the-financial-risks-from-climate-change.pdf?la=en&hash=A6B4DD1BE45B2762900F54B2F5BF2F99FA448424, accessed 3 May 2022.
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ECB, Guide on climate-related and environmental risks, November 2020, https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.202011finalguideonclimate-relatedandenvironmentalrisks~58213f6564.en.pdf?86a1d9d72ccd52cbb3d72f2a12d7c743, accessed 12 March 2022.
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Ibid., at 31 et seq.
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ECB, Supervisory Priorities for 2022–2024, 7 December 2021, https://www.bankingsupervision.europa.eu/banking/priorities/html/ssm.supervisory_priorities2022~0f890c6b70.en.html, accessed on 12 March 2022.
- 105.
ECB, ECB Banking Supervision launches 2022 climate risk stress test, 27 January 2022, https://www.bankingsupervision.europa.eu/press/pr/date/2022/html/ssm.pr220127~bd20df4d3a.en.html, accessed on 12 March 2022.
- 106.
California Senate Bill No. 30 (2017–2018); New York Department of Financial Services (NYDFS), Industry Letter. Climate Change and Financial Risks, 29 October 2020, https://www.dfs.ny.gov/industry_guidance/industry_letters/il20201029_climate_change_financial_risks, accessed on 13 March 2022; NYDFS, Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change, 15 November 2021, https://www.dfs.ny.gov/system/files/documents/2021/11/dfs-insurance-climate-guidance-2021_1.pdf, accessed on 13 March 2022.
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OCC, Principles for Climate-Related Financial Risk Management for Large Banks, 16 December 2021, https://www.occ.gov/news-issuances/bulletins/2021/bulletin-2021-62a.pdf, accessed on 14 March 2022; FDIC, Statement of Principles for Climate- Related Financial Risk Management for Large Financial Institutions, 87 FR 19507.
- 108.
OCC, at 3; FDIC, at 19510.
- 109.
Idem.
- 110.
However, it is remarkable that one of the first legislative changes, if not the first one, was made by the state of California to its insurance code, to establish a working group with the state insurance commissioner that would recommend appropriate policies.
- 111.
Regulation (EU) 2019/876 amending Regulation (EU) 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) 648/2012, O.J. 2019, L 250/1, Article 1(119); Regulation (EU) 2019/2033 on the prudential requirements of investment firms and amending Regulations (EU) 1093/2010, (EU) 575/2013, (EU) 600/2014 and (EU) 806/2014 O.J. 2019, L 314/1, Article 53.
- 112.
Directive (EU) 2019/878 amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures, O.J. 2019, L 150/253, Article 1(29)(d).
- 113.
While EBA’s report on the management and supervision of ESG risks is quite specific and comprehensive and makes a number of recommendations, the latest revision of its SREP guidelines only barely mentions ESG risks and make no mentions of climate-related risks. See EBA, EBA Report on management and supervision of ESG risks for credit institutions and investment firms, EBA/REP/2021/18, https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2021/1015656/EBA%20Report%20on%20ESG%20risks%20management%20and%20supervision.pdf, accessed 8 April 2022; EBA, Final Report. Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing under Directive 2013/36/EU, EBA/GL/2022/03, 18 March 2022, https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Guidelines/2022/EBA-GL-2022-03%20Revised%20SREP%20Guidelines/1028500/Final%20Report%20on%20Guidelines%20on%20common%20procedures%20and%20methodologies%20for%20SREP%20and%20supervisory%20stress%20testing.pdf, accessed 8 April 2022.
- 114.
Regulation (EU) 2019/876, Article 1(135); Regulation (EU) 2019/2033, Article 34. See Cullen 2018.
- 115.
European Commission, Proposal for a Directive amending Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks, and amending Directive 2014/59/EU, COM(2021)663 final, 27 October 2021; European Commission, Proposal for a Regulation amending Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor, COM(2021) 664 final, 27 October 2021.
- 116.
De Arriba-Sellier 2022.
- 117.
Bill S-243, 44th Parliament of Canada. I am indebted to Charlotte Gardes for flagging this bill.
- 118.
- 119.
Zaring 2019.
- 120.
Financial Stability Board, FSB to establish Task Force on Climate-Related Financial Disclosures, 4 December 2015, https://www.fsb.org/2015/12/fsb-to-establish-task-force-on-climate-related-financial-disclosures/, accessed 15 March 2022.
- 121.
Cf. supra Sect. 8.2.1.
- 122.
TCFD, Final Report. Recommendations of the Task Force on Climate-Related Financial Disclosures, June 2017, https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFDReport.pdf, accessed on 7 March 2022.
- 123.
Ibid., 5–6.
- 124.
Ibid., 14.
- 125.
Ibid., iv.
- 126.
Ibid., 22.
- 127.
IOSCO, IOSCO sees an urgent need for globally consistent, comparable, and reliable sustainability disclosure standards and announces its priorities and vision for a Sustainability Standards Board under the IFRS Foundation, 24 February 2021, https://www.iosco.org/news/pdf/IOSCONEWS594.pdf, accessed 15 March 2022.
- 128.
IFRS Foundation, ISSB establishes working group to enhance compatibility between global baseline and jurisdictional initiatives, 27 April 2022, https://www.ifrs.org/news-and-events/news/2022/04/issb-establishes-working-group-to-enhance-compatibility-between-global-baseline-and-jurisdictional-initiatives/, accessed 15 March 2022.
- 129.
IFRS Foundation, [Draft] IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, March 2022, https://www.ifrs.org/content/dam/ifrs/project/general-sustainability-related-disclosures/exposure-draft-ifrs-s1-general-requirements-for-disclosure-of-sustainability-related-financial-information.pdf, accessed 4 April 2022; IFRS Foundation, [Draft] IFRS S2 Climate-related Disclosures, March 2022, https://www.ifrs.org/content/dam/ifrs/project/climate-related-disclosures/issb-exposure-draft-2022-2-climate-related-disclosures.pdf, accessed 4 April 2022.
- 130.
IFRS Foundation, [Draft] IFRS S2 Climate-related Disclosures, para 21(a)(iv)(4).
- 131.
M Maurer, Companies Skewer SEC’s Climate-Disclosures Plan in Comment Letters, The Wall Street Journal, 21 June 2022, https://www.wsj.com/articles/companies-skewer-secs-climate-disclosures-plan-in-comment-letters-11655834912.
- 132.
IOSCO, Report on Sustainability-related Issuer Disclosures. Final Report, June 2021, at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD678.pdf, accessed 18 March 2022.
- 133.
IOSCO, Sustainable Finance and the Role of Securities Regulators and IOSCO. Final Report, April 2020, at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD652.pdf, accessed 18 March 2022.
- 134.
IOSCO, Environmental, Social and Governance (ESG) Ratings and Data Products Providers. Final Report, November 2021, https://www.iosco.org/library/pubdocs/pdf/IOSCOPD690.pdf, accessed 18 March 2022; IOSCO, Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management. Final Report, November 2021, at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD688.pdf, accessed 18 March 2022.
- 135.
IOSCO, IOSCO’s 2022 Sustainable Finance work plan strengthens the organization’s commitment to increasing transparency and mitigating greenwashing, March 2022, https://www.iosco.org/news/pdf/IOSCONEWS635.pdf, accessed 4 April 2022.
- 136.
G20 Italia, G20 Sustainable Finance Roadmap, 7 October 2021, https://g20sfwg.org/wp-content/uploads/2021/10/G20-Sustainable-Finance-Roadmap.pdf, accessed 2 May 2022, at 6; G20 Italia, 2021 Synthesis Report: G20 Sustainable Finance Working Group, 7 October 2021, http://www.g20.utoronto.ca/2021/G20-SFWG-Synthesis-Report.pdf, accessed 2 May 2022, at 8.
- 137.
G20 Italia, 2021 Synthesis Report: G20 Sustainable Finance Working Group, at 30.
- 138.
ASEAN Taxonomy Board, ASEAN Taxonomy for Sustainable Finance. Version 1, November 2021, https://asean.org/book/asean-taxonomy-for-sustainable-finance/, accessed 2 May 2022
- 139.
G20 Italia, 2021 Synthesis Report: G20 Sustainable Finance Working Group, at 18.
- 140.
International Platform on Sustainable Finance, Common Ground Taxonomy—Climate Change Mitigation, 4 November 2021, https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/211104-ipsf-common-ground-taxonomy-instruction-report-2021_en.pdf, accessed 2 May 2022.
- 141.
Ibid., at 6.
- 142.
Ibid., at 30.
- 143.
- 144.
NGFS, Origin and Purpose, 13 September 2019, https://www.ngfs.net/en/about-us/governance/origin-and-purpose, accessed on 13 April 2022. See also Chap. 9 by Hinselmann in this volume.
- 145.
Banque de France, Joint statement by the Founding Members of the Central Banks and Supervisors Network for Greening the Financial System—One Planet Summit, 12 December 2017, at https://www.banque-france.fr/en/communique-de-presse/joint-statement-founding-members-central-banks-and-supervisors-network-greening-financial-system-one, accessed 18 May 2022.
- 146.
NGFS, Membership, 13 April 2022, https://www.ngfs.net/en/about-us/membership, accessed 18 May 2022.
- 147.
NGFS, The macroeconomic and financial stability impacts of climate change: research priorities, 24 June 2020, https://www.ngfs.net/en/macroeconomic-and-financial-stability-impacts-climate-change-research-priorities, accessed 18 May 2022.
- 148.
Almeida et al. 2022.
- 149.
NGFS, Survey on monetary policy operations and climate change: key lessons for further analyses, 15 December 2020, https://www.ngfs.net/sites/default/files/medias/documents/survey_on_monetary_policy_operations_and_climate_change.pdf, accessed 18 May 2022; NGFS, Sustainable Finance Market Dynamics, 31 March 2021, https://www.ngfs.net/en/report-sustainable-finance-market-dynamics, accessed 18 May 2022.
- 150.
E.g. NGFS, Guide for Supervisors. Integrating climate-related and environmental risks into prudential supervision, 27 May 2020, https://www.ngfs.net/sites/default/files/medias/documents/ngfs_guide_for_supervisors.pdf, accessed 18 May 2022; NGFS, Guide on climate-related disclosure for central banks, 15 December 2021, https://www.ngfs.net/en/guide-climate-related-disclosure-central-banks, accessed 18 May 2022.
- 151.
NGFS, A call for action. Climate change as a source of financial risk, 17 April 2022 https://www.ngfs.net/en/first-comprehensive-report-call-action, accessed 18 May 2022.
- 152.
FSB, FSB Roadmap for Addressing Climate-Related Financial Risks, 7 July 2021, https://www.fsb.org/wp-content/uploads/P070721-2.pdf; IMF, Global Financial Stability Report: Markets in the Time of COVID-19, April 2020, 85–102, https://www.imf.org/en/Publications/GFSR/Issues/2020/04/14/global-financial-stability-report-april-2020#Chapter5.
- 153.
BCBS, Principles for the effective management and supervision of climate-related financial risks, 15 June 2022, https://www.bis.org/bcbs/publ/d532.htm, accessed 15 June 2022.
- 154.
Ibid., Principle 5.
- 155.
Ibid., Principle 8.
- 156.
Ibid., Principles 13–18.
- 157.
See Alexander 2015.
- 158.
Prudential Regulation Authority, The impact of climate change on the UK insurance sector, September 2015, https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/publication/impact-of-climate-change-on-the-uk-insurance-sector.pdf.
- 159.
IAIS and Sustainable Insurance Forum, Issues Paper on Climate Change Risks to the Insurance Sector, July 2018, https://www.iaisweb.org/uploads/2022/01/180727-SIF-IAIS-Issues-Paper-on-Climate-Changes-Risk.pdf, accessed on 27 May 2022. See also IAIS, Strategic Plan 2020–2024, June 2019, https://www.iaisweb.org/uploads/2022/01/190613-2020-2024-Strategic-Plan.pdf, accessed on 27 May 2022, at 7; IAIS, Global Insurance Market Report. The impact of climate change on the financial stability of the insurance sector, September 2021, https://www.iaisweb.org/uploads/2022/01/210930-GIMAR-special-topic-edition-climate-change.pdf, accessed on 27 May 2022.
- 160.
Its main input in that area is the publication with IAIS of a so-called application paper, which is intended to support the practical application of IAIS principles and standards in certain circumstances; see IAIS and SIF, Application Paper on the Supervision of Climate-related Risks in the Insurance Sector, May 2021, https://www.sustainableinsuranceforum.org/view_pdf.php?pdf_file=wp-content/uploads/2021/05/210525-Application-Paper-on-the-Supervision-of-Climate-related-Risks-in-the-Insurance-Sector.pdf, accessed on 27 May 2022.
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de Arriba-Sellier, N. (2023). The International Regulation and Coordination of Sustainable Finance. In: Dam-de Jong, D., Amtenbrink, F. (eds) Netherlands Yearbook of International Law 2021. Netherlands Yearbook of International Law, vol 52. T.M.C. Asser Press, The Hague. https://doi.org/10.1007/978-94-6265-587-4_8
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