Stakeholders and shareholders continue to shine an increasingly bright spotlight on environmental, social and governance (ESG) issues. The ongoing global pandemic, questions of social justice and emerging geopolitical risks have driven an increased demand for companies to demonstrate responsible, ethical and sustainable business strategies and operations.
Now regulators are intensifying their own scrutiny:
• In the United States, the Securities and Exchange Commission (SEC) is moving toward mandatory disclosures of the risks corporations face from climate change, as well as actions to manage these risks
• The G7 nations made their own push toward mandatory climate reporting, proposing requirements that follow the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD)
• The EU’s High-Level Expert Group launched its Sustainable Finance Disclosure Regulations (SFDR) for the finance community, and its accompanying concept of Principal Adverse Impacts (PAIs), which cover sustainability factors that include both environmental and social issues
These measures have big implications for boards, executives, legal and investor relations teams. Accessible and auditable metrics are fast moving from nice-to-haves to must-haves.