IOSCO Ratchets Up Pressure on ESG Disclosure for Companies and Asset Managers

In two reports released within days of each other, the International Organization of Securities Commissions (IOSCO) draws further attention to ESG-related disclosures by issuers and asset managers.

June 28 Report

On June 28, 2021, in the first report (with a related media release and factsheet), IOSCO reiterates the urgent need to improve the consistency, comparability and reliability of sustainability reporting for investors.

The media release states:

An important aspect of IOSCO’s work has been engagement with the International Financial Reporting Standards (IFRS) Foundation’s efforts to develop a common set of global sustainability standards to help meet investor needs and to set a sound baseline for jurisdictions to consider when setting or implementing their sustainability-related disclosure requirements. The IFRS is seeking to establish an International Sustainability Standards Board (ISSB) to sit alongside the International Accounting Standards Board (IASB), and the [June 28 IOSCO] Report elaborates on IOSCO’s vision and expectations for an ISSB.¹

And states (footnote omitted):

IOSCO recognises that individual jurisdictions have different domestic arrangements for adopting, applying or otherwise availing of international standards. It will be important for individual jurisdictions to consider how the common global baseline of standards might be adopted, applied or otherwise utilized within the context of these arrangements and wider legal and regulatory frameworks, in a way that promotes consistent, comparable and reliable sustainability disclosures across jurisdictions.

June 30 Report

In the second report, issued on June 30, 2021, IOSCO sets out and asks for feedback on five proposed recommendations about sustainability-related regulatory and supervisory expectations in asset management.

IOSCO makes the following five recommendations for “securities regulators and/or policymakers, as applicable”:

• Recommendation 1: Asset Manager Practices, Policies, Procedures and Disclosure
  [C]onsider setting regulatory and supervisory expectations for asset managers in respect of the: (a) development and implementation of practices, policies and procedures relating to sustainability-related risks and opportunities; and (b) related disclosure.
• Recommendation 2: Product Disclosure
  [C]onsider clarifying and/or expanding on existing regulatory requirements or guidance or, if necessary, creating new regulatory requirements or guidance, to improve product-level disclosure in order to help investors better understand: (a) sustainability-related products; and (b) material sustainability-related risks for all products.
• Recommendation 3: Supervision and Enforcement
  [H]ave supervisory tools to ensure that asset managers and sustainability-related products are in compliance with regulatory requirements and enforcement tools to address any breaches of such requirements.
• Recommendation 4: Terminology
  [C]onsider encouraging industry participants to develop common sustainable finance-related terms and definitions to ensure consistency throughout the global asset management industry.
• Recommendation 5: Financial and Investor Education
  [C]onsider promoting financial and investor education initiatives relating to sustainability, or, where applicable, enhance existing sustainability-related financial and investor education initiatives.

¹ Also discussed in our related June 25, 2021, Legal Update “Setting Standards for the Standard-Setters: Recent Developments in the IFRS Foundation's Sustainability Reporting Project.“