Policy, Regulation and Action: Developing Effective Market Practice, Regulation, Supervision and Risk Management for a Buoyant Ethical, Sustainable and Responsible Finance Sector

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1. Leading by example: Successful regulatory initiatives from around the world

In this section, the panel explores examples of the most effective global regulatory initiatives that have led and are currently leading innovation and development in the area of sustainable and responsible finance and investment. Further information and case studies on specific markets can be found in Appendix 1.

Key findings:
  • Europe is among the most advanced regions in terms of strength of regulation.
  • Asian countries are also pioneering sustainable initiatives, with Japan, Hong Kong and Malaysia all notable examples.
  • National regulators have introduced or periodically strengthened ESG expectations in recent years while in parallel, multilateral organizations such as the OECD, IOSCO, IOPS, G7 and G20 have begun to issue ESG guidance or incorporate sustainability in financial workstreams, suggesting the introduction of minimum globally adhered-to standards.
2. Setting the pace: How can regulators take the lead?

In this section, the panel looks at what role regulators can play in terms of leadership, guidance and enforcement when considering the definition of sustainable financenand investment products, and asks whether there could be lessons learned from Islamic finance and investment.

Key findings:
  • So far, we have not yet achieved the development of a universally accepted set of standards, due to the complexity of the issue at hand. Regulators need to take the lead here, because leaving it up to free market forces will not necessarily create an optimal solution.
  • The recent EU Taxonomy is widely viewed as a landmark step in regulating sustainable finance.
  • Recent sustainable finance policy measures are explicitly designed to remove ambiguity around the relationship between sustainability and finance, with the EU’s sustainability-related disclosure regulation a key example.
3. Coming together: Joining forces to create global standards

In this section, the panel explores how regulators can identify and define commonalities among global sustainability disclosure and reporting standards in order to achieve effective and coordinated ESG regulatory and supervisory frameworks.

Key findings:
  • The Task Force on Climate-related Financial Disclosures (TCFD) is one of the most widely accepted sets of global guidelines, but there is still further to go.
  • The International Financial Reporting Standards (IFRS) Foundation is working to establish a Sustainability Standards Board to sit alongside the International Accounting Standards Board, which could be a gamechanger.
  • Governments could do more to promote global standards as a means of risk management.
  • International cooperation is crucial.