October 5, 2023 | Amanda Khatri
Estimated reading time: 5 minutes
Table Talk series: 5 Key takeaways on ESG compliance and reporting
US citizens are struggling to get insurance due to extreme weather, Europe is melting with all-time high temperatures, and Asia is taking a stand against greenwashing.
ESG, and particularly the Environment, is a major focus for regulators around the world and was the central topic of a private industry roundtable hosted by CUBE at the Humble Grape restaurant in London last month.
Moderated by financial regulatory lawyer Barrie Ingman, and held under Chatham House rules, compliance, and risk professionals from some of finance’s biggest names gathered to discuss strategies for Environmental, Social, and Governance compliance within their organizations.
The evolving ESG reporting landscape, key developments, risk management, greenwashing, and strategies for data collection and management were debated, as each firm laid out its ESG compliance journey.
After our moderator provided a brief overview of the current ESG regulations in force, highlighting key trends and developments in the field, attendees gave their thoughts on the current landscape.
1. The divergent ESG landscape
It is clear compliance personnel with companies operating in multiple jurisdictions keep track of the rapidly moving picture both domestically and globally, and that they are aligned with colleagues elsewhere with harmonized standards and procedures.
Regulatory divergence between international jurisdictions isn’t new, but it is causing problems given ESG’s relatively recent rise to prominence and the expectations regulators have. As such, attendees said they are particularly concerned about fragmented compliance frameworks across multiple jurisdictions.
Complying with a multitude of regulatory changes is a tricky task, especially when identifying which rules or legislation apply to your company and ensuring translation of the rules into English is up to speed.
With CUBE’s AI-driven regulatory intelligence solution, businesses are alerted to every single regulatory change that is relevant to them, including regulatory requirements from different jurisdictions – taking the stress out of compliance. Leveraging AI can help to create transparent and clear reporting processes that can be used to prove compliance to regulators.
2. The pace of ESG regulatory change is keeping compliance officers up at night
The corporate ESG reporting landscape is constantly evolving with new demands and disclosure requirements adding to the burden of compliance officers (COs).
Having systems in place to comply with ESG regulations and the consequences of non-compliance are two of the major headaches for COs.
If businesses do not comply with the relevant obligations, they risk enforcement actions from regulatory bodies as seen recently with a $19mil fine for alleged greenwashing by one major firm.
In late 2022, the US Securities and Exchange Commission (SEC) also fined Goldman Sachs Asset Management (GSAM) for failing to abide by its own ESG investment policies. COs told the roundtable that while ESG enforcement actions take time to be finalized, they are happening, and firms must move quickly to update compliance processes and remain on the right side of regulators.
It was noted that CUBE’s Automated Regulatory Intelligence (AI) filters through every single relevant rule or law, in every single jurisdiction so that compliance officers can focus on implementing necessary ESG changes in a timely manner.
3. Sourcing data
Sourcing reliable and comprehensive ESG data is a significant challenge, senior compliance professionals at major banks said. To overcome this, firms recommended using both internal and external data sources, which could include the following:
- Company reports, such as annual reports, sustainability reports, and CSR reports
- Internal databases and systems, such as CRM systems, HR systems, and environmental monitoring systems
- Employee surveys and focus groups
- ESG data providers, such as Bloomberg, Refinitiv, and Sustainalytics
- Government agencies, such as the Securities and Exchange Commission (SEC) and the Environmental Protection Agency (EPA)
- Non-governmental organizations (NGOs), such as the World Resources Institute and the Global Reporting Initiative
By knowing how your firm is currently performing, compliance teams can use this information to suggest and implement improvements to address ESG regulatory gaps.
4. Products that align with ESG regulatory requirements
A key part of demonstrating ESG compliance is through the development and marketing of products that abide by the same policies e.g., the product is ‘green’ when it is described as ‘green’.
By ensuring that product descriptions, ratings, and marketing language are transparent and reflect the true reasons for the product, there is less chance of non-compliance.
Greenwashing, when a company makes fictitious claims about something it is doing to combat climate risk and promote a sense of environmental concern, is on the rise, and increasingly on the regulatory agenda.
5. Horizon scanning for further ESG regulatory changes
Climate and social risk standards are not harmonized around the world, meaning advanced compliance tools are needed to ensure global teams are aligned.
As their organizations move towards net zero targets, compliance teams are on high alert for shifts in ESG reporting standards, attendees said. To stay ahead of the curve, products such as regulatory change management tools can efficiently alert your firm to any changes in a matter of minutes, ensuring your firm is future-ready for ESG.
If you have any questions or would like to find out more about CUBE, the roundtables, or how CUBE can help your firm with regulations such as ESG, get in touch today.
We will be running various roundtable talks throughout the year on hot topics such as blockchain, Edinburgh reforms, consumer protection, AI, and more. If you’re interested in being invited to CUBE’s exclusive Table Talk series to connect with industry experts, please contact us.
Discover how CUBE can help your firm with ESG regulations.