16 May, 2022

Sustainable Finance Regulatory Update: April 2022 


This month, climate continues to be the primary focus of mandatory disclosures as the UK and Canada adopt TCFD-aligned reporting requirements. The European Commission and World Federation of Advertisers articulate the dangers of unsubstantiated green claims in product marketing and introduce measures to prevent greenwashing. South Africa, Colombia and Sri Lanka outline taxonomies in line with international standards with an overlay of local environmental and social priorities. India ramps up its ESG compliance standards for top companies. UK’s Financial Conduct Authority evaluates company performance in terms of board diversity as it sets ‘comply or explain’ standards. Standard-setting body ISSB furthers cooperation with representatives from different jurisdictions to improve scalability of its global baseline standards. To learn more about the most recent updates, read on.  


EU Commission adopts technical standards for sustainability-related financial disclosures 

The European Commission clarified disclosure rules for financial market participants under the Sustainable Finance Disclosures Regulation (SFDR). The adopted provision will apply from 1 January 2023. In response to emerging interpretations of SFDR guidance, the EC will require participants to provide information in a specified manner. Under the new rule, financial market participants must disclose the negative economic and social impacts of investments which will help determine the sustainability performance of financial products. Data quality improvements and harmonization could be starting points in promoting coherence and preventing greenwashing. Read more

EU Proposed on new Ecodesign Requirements for Sustainable Products

The Proposal for a Regulation establishing Ecodesign requirements for sustainable products (ESPR) was released last week. The recently released ESPR will extend the scope of the Ecodesign Directive to non-energy products except for food and medicine. The regulation will provide a general framework enforcing ecodesign requirements for products sold in the EU market. The Proposal is part of the European Sustainability Initiative (ESI), a package of inter-related monitoring protocols that includes communication on product sustainability, textiles and a proposed consumer rights empowerment directive. Existing ESI directives will be in dialogue with future directives regulating the advertisement of products with green claims. Read more

United Kingdom

UK enforces TCFD-aligned reporting requirements 

The UK is set to impose climate-related reporting requirements in line with TCFD recommendations from 6 April 2022. The new law will require 1300 of UK’s largest registered companies and financial institutions to report on climate-related risks and opportunities, a major step towards achieving the government’s goal of becoming the world’s greenest financial system. The UK aims to improve data quality and availability for high impact businesses through climate-related reporting ahead of COP26 and G20 summits. As the UK reinforces its commitment to net zero by 2050, it will endorse due diligence as the key operational principle, encouraging companies to internalize processes of climate-related risk assessment. Read more

FCA to require UK-listed companies to disclose on board diversity

The Financial Conduct Authority (FCA) will require listed companies to disclose on board and executive diversity targets from financial period starting 1 April 2022. The ‘comply or explain’ statement targets require 40% women on the board, at least one woman in a senior board position (C-suite executive or Senior Independent Director) and one board member from a non-White ethnic minority background. FCA’s analysis of company diversity will also extend to key board committees, including audit and remuneration committees. Read more

UK launches taskforce to develop ‘gold standard’ for UK companies’ climate transition plans

HM Treasury launched a taskforce to develop a ‘gold standard’ for UK companies’ climate transition plans. In the UK, as of 2023 large companies and certain financial sector firms will be required to publish a transition plan. Climate transition plans are an important tool to provide insights on how to reach net zero by 2050 by setting intermediate milestones. It is important to develop a credible and reliable framework on how these transition plans should like and the requirements to be met. Read more


Canada to impose mandatory climate disclosures on banks and insurers

Canada’s budget added a special provision that will require banks and insurers to provide climate disclosures in line with the TCFD framework. Under the new initiative, the Office of the Superintendent of Financial Institutions (OSFI) will hold consultations with multiple stakeholders in the financial system to assess the proposed implementation of climate-related disclosures starting in 2024. The OSFI would require financial institutions to collect emissions data and climate risk information from clients. Additionally, the government will incorporate ESG disclosure requirements for federally regulated pension plans. Read more

Colombia publishes LatAm’s first Green Taxonomy 

Colombia leads the way in Latin American sustainable finance by launching its own Green Taxonomy. In essence, the classification system replicates EU’s approach for determining the contribution of projects, activities and assets to key environmental objectives. However, Colombia’s Taxonomy differentiates itself by underscoring the importance of land use in sustainability reporting. The country has taken a huge step towards reinforcing its climate goals by focusing on the regulation of priority sectors, specifically, agriculture, forestry and livestock. 59% of Colombia’s greenhouse gas emissions can be attributed to the agriculture, forestry and livestock sector, therefore it is likely that these sector activities will be subject to additional screening criteria and minimum threshold requirements in the future. Read more 


South Africa launches first Green Finance Taxonomy edition

South Africa’s Treasury released the first edition of its Green Finance Taxonomy with the goal of creating locally adapted rules and sustainability standards for market participants. The Taxonomy is a ‘living document’ that seeks to drive large-scale climate-friendly capital allocation decisions and green investments through increased transparency. The ‘green’ design of South Africa’s recent environmental provision remains embedded in customary contours of global governance as it is modeled after the EU Taxonomy. Defining the social cost of mitigation activities is tough in emerging economies. South Africa may need to address the entanglement of trade and environmental issues. Additionally, the country must contribute analysis of sustainability standards to inform inclusive monitoring protocols and approaches. Read more


India’s Securities and Exchange Board adopts ESG reporting rules

India’s financial regulatory authority will require the country’s top 1000 companies by market cap size to disclose along with annual stock exchange filings a Business Responsibility and Sustainability Report (BRSR). The new rules on good governance will establish best practices for evaluating enterprise value in line with a company’s overall ESG impact.  So far, the Indian government has limited its role of monitoring compliance with an overarching sustainability agenda and businesses have taken initiative to introduce their own sustainability aligned KPIs. The new measure underscores the need for harmonization and institutional oversight of business practices. Read more

Sri Lanka’s Green Taxonomy is under development

Sri Lanka’s central bank is currently developing a green finance taxonomy for the banking sector that will help provide a framework for the assessment of enterprise value and guide green investments. The country plans to reduce its reliance on petroleum products and shift to production and consumption of renewable sources of energy. The transition to low carbon energy sources will not only reduce Sri Lanka’s expenditure on imported fossil fuels but also reduce its greenhouse emissions. By creating parallel public and private incentives to comply with climate standards, Sri Lanka hopes to establish a robust sustainable energy infrastructure. Read more  


ISSB establishes working group to enhance compatibility between global baseline and jurisdictional initiatives

Leading standard-setter ISSB has established a working group to create an ongoing dialogue between jurisdictional initiatives on sustainability reporting and ISSB’s exposure drafts. ISSB will solicit feedback from multiple stakeholder groups as this will inform the development of a scalable global baseline. These standards, which will have an initial focus on climate requirements, can be adopted on a voluntary basis by market participants or be embedded in public policy. Read more

World Federation of Advertisers issues guidance on making credible environmental claims

Amid growing concerns about greenwashing the World Federation of Advertisers issued guidance to strengthen self-assessment for products making environmental claims. The guidance requires marketing and communications materials to be accompanied with ‘robust evidence for all claims likely to be regarded as objective and capable of substantiation’. WFA intends to create an overarching set of sustainability-linked marketing principles that allow consumers to make informed decisions when comparing products. Read more

Other News & Resources 

  • The World Benchmarking Alliance has published the methodology for its forthcoming benchmark that will rank 1,000 companies on their nature-related impacts and dependencies. Each company will receive a score based on 25 nature indicators and 18 social factors when the benchmark is released in December. 
  • The International Monetary Fund has created a loan-based Resilience and Sustainability Trust to help countries build resilience to external shocks and ensure sustainable growth. Complementing the IMF’s existing lending toolkit, this will focus on longer-term structural challenges, including climate change and pandemic preparedness. About three-quarters of IMF member states will be eligible. 
  • During the City Week 2022 conference in London, International Sustainability Standards Board chair Emmanuel Faber said the organisation will soon launch a platform for jurisdictions working on climate disclosures with the aim of aligning efforts. 
  • Science Based Targets initiative launches net-zero finance standard development process with Foundations paper. Read more


  • NGFS consultation on its repository of climate data needs and available sources: This public consultation seeks feedback on the directory web interface through a short online questionnaire. The consultation is open until May 6, 2022, COB. Read more
  • SEC Climate rule: On March 21, 2022, in a landmark proposal, the US Securities and Exchange Commission (“SEC”) proposed rules that would require public companies to disclose extensive climate-related information in their SEC filings. The proposal is open for public comment through at least May 21, 2022Read more
  • EC Targeted consultation on the functioning of the ESG ratings market in the European Union and on the consideration of ESG factors in credit ratings: 4 April 2022 – 6 June 2022. Link
  • ISSB Exposure Drafts: International Sustainability Standards Board has started a public consultation on climate-related financial disclosures. The ISSB seeks feedback on the proposals until 29 July 2022. Read more
  • EBA launches discussion on the role of environmental risks in the prudential framework: The European Banking Authority (EBA) published a Discussion Paper on the role of environmental risks in the prudential framework for credit institutions and investment firms. The Paper explores whether and how environmental risks are to be incorporated into the Pillar 1 prudential framework. The consultation runs until 2 August 2022. Read more
  • EFRAG Consultation on the exposure drafts: EFRAG’s Due Process establishes public consultations as a key step of its standard setting activities. EFRAG therefore wishes to announce that it will launch a public consultation on the first set of exposure drafts around the end of April. The consultation deadline will be 8th August 2022. Read more