Securities regulators from growth and emerging markets are seeking public feedback on proposed recommendations related to the development of sustainable finance in capital markets and the role of securities regulators in this area.
IOSCO´s Growth and Emerging Market Committee (GEMC) today published the consultation report Sustainable finance in emerging markets and the role of securities regulators, which proposes 11 recommendations for emerging market member jurisdictions to consider when issuing regulations or guidance regarding sustainable financial instruments. Among other things, the recommendations propose requirements for disclosure of material Environmental, Social and Governance (ESG) specific risks, aimed at enhancing transparency.
The consultation report explores the trends and challenges that influence the development of sustainable finance in emerging capital markets. It also provides an overview of the initiatives that regulators, stock exchanges, policy makers and others key stakeholders in emerging markets have undertaken in this area. The report identifies the pre-requisites for creating an ecosystem that facilitates sustainable finance, such as an appropriate regulatory framework and fit-for-purpose market infrastructure, reporting and disclosure requirements, governance and investor protection guidelines and mechanisms to address needs and requirements of institutional investors.
Given the global nature of sustainable instruments, the GEMC believes its recommendations will benefit both issuers and investors by improving the consistency of regulation of sustainable finance in emerging markets.
The proposed recommendations fall into the following categories:
Integration by issuers and regulated entities of ESG-specific issues in their overall risk appetite and governance (Recommendation 1);
ESG-specific disclosures and reporting (Recommendation 2);
Data quality (Recommendation 3);
Definition of sustainable instruments (Recommendation 4);
Eligible projects and activities (Recommendations 5 to 9);
Integration of ESG-specific issues into the investment analysis, strategies and overall governance of institutional investors (Recommendation 10); and
Building capacity and expertise for ESG issues (Recommendation 11).
The IOSCO Growth and Emerging Markets Committee welcomes comments on the consultation report on or before 1 April 2019.