Sustainable finance regulation around the world increased in both scope and pace in 2022, according to a report released Monday by ISS ESG, the responsible investment arm of Institutional Shareholder Services.
The Depth & Breadth of Sustainable Finance Regulatory Initiatives: Global Developments in 2022 report analyzes initiatives proposed or implemented to date and breaks that down by region and country. The report is based on a proprietary ISS ESG index.
"All regions see sustainable finance regulation as critical to increasing market transparency and reducing risks of greenwashing," the report said.
European Union countries continue to lead in depth and breadth of regulatory initiatives, while Asia has accelerated the pace of new initiatives, and North America and Australia have significantly increased regulatory activity. The U.K. "has the most expansive regulatory framework of any country outside the EU," the report said.
The key topics in sustainable finance regulation are taxonomies; product standards, disclosures and labeling; management and disclosure of climate risks; management and disclosure of ESG risks; ESG in stewardship; and green bond guidelines.
On green taxonomies, for example, more than 20 countries or regions have developed or are currently developing taxonomies, often in combination with international frameworks, the report found.
Regulators are prioritizing management of climate-related financial risk and prevention of greenwashing, the report said, but nature-related risks and social issues are beginning to get more attention as well.
"The year 2022 has been a watershed for regulation mandating climate and ESG reporting by corporate issuers across major capital markets,'' the report said. "Jurisdictions such as the EU, the U.S., New Zealand, Japan, India, China, the Philippines, Taiwan, Chile, and Switzerland have or are developing relevant rules or guidelines" and the International Sustainability Standards Board has published exposure drafts for global ESG standards, it said.