The International Organization of Securities Commissions (IOSCO), the Madrid-based forum for securities regulators, has advocated for an enhanced role of its members in the field of ESG investing and sustainable finance, closely related to their investor protection mandates.
In a report prepared by IOSCO’s own Sustainable Finance Network, the organisation acknowledges that most securities regulators do not have an explicit remit to either promote sustainability issues or specific types of investments.
However, the report said that ESG issues pose important challenges in meeting core objectives such as investor protection, market efficiency and mitigation of systemic risks. As such, it acknowledges sustainable finance issues are relevant from a strictly regulatory perspective.
IOSCO’s Sustainable Finance Network comprises 42 of its members – including the US Securities and Exchange Commission, despite January’s SEC announcement that ESG factors will not be considered in the modernisation of its disclosure rules.
IOSCO recently set up a board-level Task Force on Sustainable Finance, chaired by Erik Thedéen, Director General of Sweden’s securities regulator, Finansinspektionen. Thedéen is former CEO of KPA Pension, an asset manager for the local government sector.
The report said that ESG issues pose important challenges in meeting core objectives such as investor protection, market efficiency and mitigation of systemic risks.
The Task Force has a mandate to promote the two main objectives: addressing transparency and promoting investor protection.
Their main three tasks are:
First, improve sustainability-related disclosures made by issuers and asset managers, and crucially “assist IOSCO members to identify and address greenwashing and other investor protection concerns”.
Second, work in collaboration with other international organisations and regulators in order to avoid duplicative efforts and to enhance coordination of relevant regulatory and supervisory approaches.
Third, conduct research on transparency issues among ESG data providers, disclosure of methods and governance among ESG rating agencies, or risks of greenwashing in the market for sustainable investment products, among other topics.
“At a time where the market for sustainable investing is growing rapidly, such disclosure is also crucial for the credibility of investments that claim to pursue sustainability objectives,” the report stated.