Regulation is shaping the sustainability agenda and changing the way companies do business in different jurisdictions, but keeping pace with constant regulatory updates has become a mammoth task for businesses and investors. In this recurring series, S&P Global Sustainable1 presents key environmental, social and governance regulatory developments and disclosure standards from around the world.

In this month’s update, we look at the IFRS Foundation taking over climate disclosure monitoring from the Task Force on Climate-related Financial Disclosures, the European Commission’s proposal for monitoring soil health in the EU and new sustainability-related reporting requirements for mutual funds in India.

International    Europe    United States and Canada  Asia-Pacific   Africa    Latin America and the Caribbean

International

IFRS Foundation to take over climate disclosure monitoring from the TCFD

The IFRS Foundation, which develops international accounting standards, is set to take over the monitoring of companies’ climate-related disclosures from the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD) at the beginning of 2024, the FSB said on July 6. The FSB made the announcement a few weeks after the IFRS’s International Sustainability Standards Board published its inaugural sustainability and climate-specific disclosure standards. The International Organization of Securities Commissions (IOSCO) endorsed the ISSB standards on July 25 and called on its members to adopt or apply the standards to provide investors with consistent sustainability-related disclosures. IOSCO has 130 members across jurisdictions, accounting for more than 95% of the world's financial markets.

Europe

European Commission adopts sustainability reporting standards

The European Commission adopted on July 31 corporate sustainability reporting standards that cover a range of topics including climate change, biodiversity and human rights. The European Sustainability Reporting Standards (ESRS) apply to companies that are subject to the EU's Corporate Sustainability Reporting Directive (CSRD). The reporting requirements will be phased in, starting in 2024 for certain companies. The Commission said it made changes to the standards by making some disclosures voluntary and giving companies more flexibility to define what information is material. The Commission said the standards take account of discussions with global standard-setting bodies like the ISSB and the Global Reporting Initiative to ensure interoperability and to avoid unnecessary double-reporting by companies.

European Commission issues proposals to increase recycling in automotive sector

The European Commission proposed on July 13 new regulation designed to improve the recycling of raw materials in the automotive sector. Under the proposals, 25% of the plastic used to build a new vehicle must come from recycling, of which 25% must be recycled from end-of-life vehicles. The proposed rules would lead to improved recovery of critical raw materials such as plastics, steel, and aluminum, the Commission said. The new rules would also establish national extended producer responsibility schemes to encourage manufacturers to provide financial support to car dismantlers to ensure they reuse car parts. The rules would generate €1.8 billion in net revenue and reduce greenhouse gas emissions by 12.3 million metric tons by 2035, the Commission said.

European Commission announces draft rules for textile circularity

The European Commission said on July 5 it was proposing rules to make producers responsible for the full lifecycle of textile products and to support the sustainable management of textile waste in the EU. Producers would have to cover the costs for managing textile waste, which would encourage them to reduce waste and increase the circularity of textile products, the Commission said. The environmental performance of their textiles will determine the amount producers would have to pay into an extended producer responsibility scheme, the Commission said. The proposed rules would also promote research and development into technologies that would promote the circularity of the textiles sector, such as fiber-to-fiber recycling. The proposals also aim to address illegal exports of textile waste to countries that are ill-equipped to deal with it, the Commission said.

European Commission proposes new law to improve health of EU soils

The European Commission adopted a proposal for a new soil monitoring law on July 5 to make the use of soils within the EU more sustainable in farming and other sectors. The proposal would implement a monitoring framework for all soils across the EU so member states could take measures to regenerate degraded soil. Soil data management would be brought under one roof, combining soil sampling data from the EU's Land Use and Coverage Area frame Survey (LUCAS) with satellite data from the EU's Copernicus Climate Change Service as well as national and private data. The data would form the basis for technology that would make soil use healthier in farming, encourage farmers to implement the most appropriate treatment methods, and increase soil fertility and yields. The Commission said 60% to 70% of EU soils are currently unhealthy and that soil degradation costs more than €50 billion annually.

UNITED STATES AND CANADA

US announces $20 billion in clean energy technology financing

The Biden administration on July 14 announced $20 billion in available funding aimed at speeding up the rollout of clean energy technologies in low-income and disadvantaged communities. The funding is part of the Inflation Reduction Act, a comprehensive energy and climate law that allocates nearly $370 billion in federal spending to decarbonization efforts over the next decade. The funding will be deployed through a $14 billion National Clean Investment Fund competition, which will provide grants to two to three clean financing institutions that will partner with the private sector to finance clean technology projects. At least 40% of the funds will be spent on low-income and disadvantaged communities, the White House said in a statement. The remaining $6 billion in funding will be allocated through the Clean Communities Investment Accelerator, which will provide grants to community lenders on clean technology projects.

ASIA-PACIFIC

Indian securities market regulator introduces new ESG disclosure rules for mutual funds

The Securities and Exchange Board of India introduced on July 20 a series of new disclosure requirements for mutual funds, which the regulator said would encourage green financing and reduce risks of greenwashing. Mutual funds at present can only offer one environmental, social and governance-related equity fund to investors, but under the new policy, they will be permitted to offer several investment products based on one of six investment strategies: exclusion; integration; best-in-class and positive screening; impact investing; sustainable objectives; and transition or transition related-investments. The funds will have to invest at least 80% of assets under management in equity instruments related to the investment strategy. India introduced reporting standards for large companies on metrics such as gender diversity, carbon emissions intensity and water consumption in 2021. The new rules require ESG funds to invest at least 65% of their assets under management in companies reporting according to the standards. ESG-related funds will have to comply with the new requirements by Sept. 30, 2025. 

Singapore regulators launch consultation on mandatory climate reporting for companies

Singapore’s Accounting and Corporate Regulatory Authority and Singapore Exchange Regulation launched a public consultation on July 6 on recommendations that would require listed companies to report on their climate exposure as of financial year 2025. Non-listed companies with annual revenue of at least $1 billion would also have to report by financial year 2025, the regulators said. Companies would disclose by using reporting standards based on the ISSB’s recently announced disclosure standards. Both listed and non-listed companies could opt to disclose more complex requirements such as Scope 3 greenhouse gas emissions — the indirect emissions that occur up and down a company's value chain — one to two years after the mandatory reporting takes effect, the regulators said. The consultation closes on Sept. 30.

Australian regulator publishes draft guidance on companies’ environmental claims

Australia’s competition regulator issued draft guidance on July 14 on sustainability and environmental claims made by companies, with the aim of protecting consumers from greenwashing. The Australian Competition and Consumer Commission said it had conducted a “greenwashing internet sweep,” which had found 57% of businesses were making “potentially misleading environmental claims.” The draft guidance identifies eight practical principles for businesses to apply when making environmental claims. These include ensuring claims are factually correct, having evidence to back claims, not leaving out important information, avoiding visual elements that give the wrong impression about the environmental benefits of a product or service, and other guidelines. A consultation on the draft runs until Sept. 15, 2023.

AFRICA

South Africa holds consultation on renewable energy plan

The South Africa government held a consultation from July 17 to July 31 on its South African Renewable Energy Masterplan (SAREM), which sets out an action plan for the country to benefit from the growing renewable energy market and battery storage technologies. The plan sets out six objectives, including fostering the economy by supporting demand for and investment in renewable energy and storage projects; expanding the industrial capacity in the renewable energy and storage value chain; creating decent employment opportunities in development, construction, manufacturing, operations and maintenance; improving the skills base of workers and supporting technological innovations; broadening the local supplier base and encourage inclusivity; and contributing to a just transition and supporting the shift of South Africa’s electricity supply industry from a centralized model to a decentralized energy structure to ensure the whole population benefits.

LATIN AMERICA AND THE CARIBBEAN

Argentina securities regulator approves strategy for sustainable finance

Argentina’s securities market commission, the Comisión Nacional de Valores (CNV), said on July 10 it had approved Argentina’s national strategy for sustainable finance, an initiative of the country’s economy ministry. The approved document sets out five central themes: a regulatory framework; a taxonomy of sustainable activities; information gathering; reporting and data analysis; and sustainable finance instruments. The CNV said it would contribute to establishing a regulatory framework, promoting transparency and reporting of ESG factors by regulated entities, supporting financial instruments and innovative projects that would drive capital to social and environmental projects and help achieve the goals of the UN Sustainable Development Goals, launched in 2015 with an aim to create a safer, more prosperous planet by eradicating poverty, eliminating hunger and providing clean water and sanitation worldwide by 2030.