A series of briefings that take a bite-size look at international trends in different jurisdictions, drawing on Baker McKenzie’s expert financial services practitioners with local market knowledge.
This edition takes a bite-size look at the different rates of progress of environmental, social and governance (ESG) regulation and voluntary standards across the European Union, Hong Kong SAR, Japan, Singapore, the United Kingdom and the United States. The 2015 Paris Agreement on Climate Change specifically identified finance as having a key role in mitigating the effects of global warming, as large-scale investments are needed to significantly cut emissions. Nor, of course, are financial institutions themselves immune from the effects of climate change, as their prudential soundness and ability to meet long-term commitments will be jeopardized if the value of their capital is impacted. The COVID-19 pandemic has provided a significant impetus to the adoption of ESG regulation and voluntary standards, although the industry’s progress is being slowed by a lack of common and consistent international standards over disclosure and classification. What was, initially, (largely) voluntary is becoming essential to win business and is, increasingly (especially in Europe), subject to legal and regulatory imperative, as exemplified by the number of jurisdictions proposing to make mandatory the Task Force on Climate-related Financial Disclosures (TCFD).