The following article is written by our guest writer, Levent Ergin, Head of Data Governance, Privacy & ESG UKI Strategic Accounts, Informatica
The landscape of environmental, social, and governance (ESG) regulations is rapidly evolving. On October 29, 2021, the U.K. Government enshrined into law that from April, 6, 2022, onward, 1,300 of the largest U.K companies and financial institutions will be required to share climate-related information on a mandatory basis, in line with the guidelines set by the Task Force for Climate Related Financial Disclosures (TCFD).
In the E.U., ESG disclosures are already mandatory for 11,000 asset managers and other financial market participants according to the Sustainable Finance Disclosure Regulation (SFDR). As of December 2022, further Level 2 disclosures will be required by the SFDR, comprising a variety of quantitative ESG criteria.
On April 21, 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), amending the existing reporting requirements of the Non-Financial Reporting Directive (NFRD) and extending the scope to all large companies in 2023. This brings an additional 50,000 large public-interest European companies into the scope of mandatory ESG reporting.
In September 2021, the Securities and Exchange Commission (SEC) in the U.S. issued a “Sample Letter to Companies Regarding Climate Change Disclosures.” In light of this, firms should be prioritizing their ESG data management for mandatory disclosures or risk penalties with regulators and shaken confidence from investors.
The Importance of an ESG Framework
It is critical for multinational companies to have a robust ESG data management framework in order to not only comply with these numerous ESG and sustainability reporting standards globally, but to be able to extract value from their ESG data and processes at the same time. ESG reporting is a complex landscape, one that requires its audience to come to grips with the acronym soup.
Giving an overview of the complexity of ESG reporting, here’s a quick look through ESG goals and principles, reporting frameworks, and ratings and indices, as well as the regulations which our ESG customers have to navigate through.