In recent developments within the Environmental, Social, and Governance (ESG) market, several noteworthy events have arisen requiring the attention of legal professionals and corporate entities.
This month’s ESG Market Alert includes several key issues affecting UK corporates.
- The creation of UK Sustainability Disclosure Standards,
- SEC’s substantial move towards regulating ESG disclosures with subpoenas being issued to various fund managers,
- The EU’s response to the EFRAG draft standards with a considerably diluted form yet a stringent introduction of carbon import tax,
- An update in market practice highlighting the need for governance structures to adequately handle ESG reporting.
The creation of UK Sustainability Disclosure Standards marks an attempt to establish a framework for greater clarity and consistency in environmental sustainability disclosures. This development is set to foster transparency and will potentially have large corporations adjust their reporting strategies for environmental impact and sustainability.
Meanwhile, in the United States, the Securities and Exchange Commission (SEC) has taken significant steps towards regulating ESG disclosures. By issuing subpoenas to fund managers over ESG disclosures, the SEC has not only emphasized the importance of truthful and accurate ESG reporting but may be signaling a more robust oversight in the future.
The European Union’s response to the EFRAG (European Financial Reporting Advisory Group) draft standards may have significant implications for UK corporates. While the EU has diluted the EFRAG standards, a tougher stance has been taken on carbon emissions with the introduction of a hefty carbon import tax. This move showcases the increasing priority given to climate change considerations, the impact of which must be addressed by all global corporate entities.
Finally, the report highlights the importance of sound internal governance structures for ESG reporting. As ESG considerations continue to grow in importance for corporates globally, robust governance structures will become increasingly critical.