Forging the path to international standards in sustainable finance

Finding a common baseline

Regulatory bodies, policy-makers and the investor community across the globe are making efforts to transition to a sustainable finance model. The Network for Greening the Financial System has made huge strides in aligning sustainable monetary policy internationally and integrating climate into risk assessments. The Task Force on Climate related Financial Disclosures has set a benchmark for financial and corporate disclosures and the reporting of climate-related financial information. Green taxonomy regulation has been introduced across several jurisdictions, spearheaded by the European Union.

A path is being forged to international standards for sustainable finance. However, the increase of standards and regulatory requirements brings challenges, including jurisdictional and sector differences, and varying principles, objectives, benchmarks and metrics in taxonomies and disclosure frameworks. As a result, many are calling for a baseline, common ground taxonomy and convergence of standards.

To address these challenges, OMFIF’s Sustainable Policy Institute has joined forces with Luxembourg for Finance to consider what is required for the standardisation of sustainable finance. Taking insight from interviews with experts across the financial sector and real economy, this report explores the latest developments in taxonomy regulation and reporting frameworks, including the TCFD, Sustainable Finance Disclosure Regulation and the Corporate Sustainability Reporting Directive. These are integral to transitioning the financial sector and wider economy to net zero by 2050.

The report examines whether there should be convergence of standards internationally, the implications of standardisation and potential benefits of divergence and the market-led approach being taken by the US. It assesses the need for a common language across standards and looks at the expected role of the newly created International Sustainability Standards Board in providing a global baseline and convergence for disclosure standards.

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