A report from CDP highlights the increasing importance of Environmental, Social, and Governance (ESG) ratings in financial institutions’ strategic frameworks.

In 2023, 85% of FIs used ESG ratings to identify climate-related opportunities, managing over $4 trillion in assets.

Key findings:

The growing demand for ESG ratings and data products has led to increased scrutiny and regulation.

The International Organization of Securities Commissions (IOSCO) has proposed a framework for improved oversight and transparency.

Major jurisdictions like Japan, Hong Kong, Singapore, the UK, India, and the EU have adapted their regulatory frameworks to align with IOSCO’s guidelines. The report also highlights the growing use of ESG ratings by 94% of investors.

Standardized definitions are needed to prevent market confusion and enhance policy alignment.

For ESG ratings and data products to support sustainable finance effectively, regulations must be interoperable across borders.

Maintaining consistency with IOSCO’s baseline is vital for fostering a robust and unified ESG regulatory environment.

Conclusion:

Interoperable regulations across borders are crucial for ESG ratings and data products to support sustainable finance effectively. Consistency with IOSCO’s baseline is essential for a robust and unified ESG regulatory environment.