How will simplified regulatory reporting impact the future of ESG data?

The future of ESG data is currently being shaped by reduced regulatory reporting demands. This shift has significant implications for the investment landscape and the way companies report on their environmental, social, and governance (ESG) performance.

One key player in this arena is the International Sustainability Standards Board (ISSB), which is set to become the global standard-setter for ESG reporting. Elisabeth Ottawa, a senior executive at Schroders, highlighted the importance of the ISSB in ensuring consistency and comparability in ESG reporting. Ottawa emphasized that reduced regulatory reporting demands could lead to a more streamlined and efficient system for companies to report their ESG metrics.

The Securities and Exchange Commission (SEC) in the United States is also moving towards a principles-based approach to ESG reporting, rather than prescriptive rules. This approach is expected to provide companies with more flexibility in how they report their ESG data while still ensuring transparency and accountability.

Furthermore, organizations like Ceres are advocating for increased public disclosure of climate-related financial risks. This push for greater transparency around climate risks can help investors make more informed decisions and drive capital towards sustainable investments.

On the regulatory side, the Basel Committee on Banking Supervision and the European Central Bank are also exploring ways to incorporate climate risks into their regulatory frameworks. By aligning regulatory requirements with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), these institutions can strengthen the resilience of the financial system to climate risks.

Overall, the trend towards reduced regulatory reporting demands signals a shift towards more principles-based and consistent ESG reporting standards. This evolution is expected to simplify the reporting process for companies, increase transparency for investors, and drive capital towards sustainable investments. As the ISSB continues to develop global standards for ESG reporting, the investment community can expect a more unified and comprehensive approach to assessing companies’ ESG performance.