The accelerating climate crisis is increasing pressure on regulators and corporate executives to set universal standards for the burgeoning sustainable finance industry.
Sustainable finance has quickly become a core business for most banks and fund managers, since the transition to a lower-carbon world will require trillions of dollars of investment in renewable energy, electric vehicles and a host of related technologies and infrastructure.
But there’s a problem: the absence of consistent guidelines and definitions with which players can examine markets -- including carbon credits, ESG funds and green bonds.
Thanks to a “proliferation” of varying standards, incorporating company ESG disclosures into conventional regulatory filings and frameworks has been difficult, said Christine Kung, head of international affairs and sustainable finance at Hong Kong’s Securities and Futures Commission.
Investors can’t get comparable and consistent disclosures when making decisions, and there are no globally consistent definitions and taxonomies, Kung said during a briefing hosted by Natixis Investment Managers.
“The good news is that regulators are working together to address these challenges,” she said Wednesday.
The push for more transparency comes as total green bond issuance exceeds $1 trillion, and a similar amount of money sits in ESG-focused funds.
Financial companies and market authorities must collaborate on a universal framework, said Kevin Stiroh, executive vice president and head of the supervision group at the Federal Reserve Bank of New York.
“The financial risks of climate change are part of our core risk-management perspectives,” said Stiroh, speaking on a panel discussion hosted by the Institute for International Finance (IFF).
“It’s absolutely important that as a regulatory community, we harmonize and coordinate with international bodies across the globe,” said Rostin Behnam, commissioner of the U.S. Commodity Futures Trading Commission, speaking at the IIF conference. “We don’t have to reinvent the wheel, but there needs to be more specificity, there needs to be more questions asked and more work done so we can have standard, reliable, common terms and common information.”