UK standard setter publishes first sustainable finance guide

British Standards Institution leads five-year standardisation programme

The UK’s national standards setting body has today launched its first guide on sustainable finance as part of a collaboration with the UK Government and the financial sector.

It is the first guidance out of the British Standards Institution’s (BSI) five-year long Sustainable Finance Standardisation Programme, which aims to “define globally applicable standards for the finance sector”.

Today’s guide does not set any actual British standards on sustainable finance but establishes a “common terminology” and outlines a framework based on five principles to assist finance firms that want to be more sustainable and “better aligned with global initiatives like the United Nations’ Sustainable Development Goals (UN SDGs) and the Paris Agreement”.

It was created with UK’s Department for Business, Energy and Industrial Strategy (BEIS) and supported by the likes of Aviva Investors, Hermes Investment, HSBC Global Services and Lloyds Banking Group.

‘PAS 7340:2020 Framework for embedding the principles of sustainable finance in financial services organizations – Guide’ is the result of the PAS [Publicly Available Specification] process, which enables a guide to be “rapidly developed” to fulfil an “immediate need in industry”.

"It aims to facilitate shared understanding and collaboration in the global finance sector around sustainability".

Though not creating a British Standard, the document states that a PAS can be considered for development to become one or as “input into the development of a European or International Standard”.

A second UK-based PAS – titled ‘PAS 7341 Responsible and sustainable investment management – Specification’ – is currently being developed and is available for public comment until 28 February. 

A third on sustainable finance products and funds is proposed and is in the early planning stage.

“Growing awareness of the urgent need to address global sustainability issues has driven increasing numbers of financial institutions to integrate environmental, social and governance issues into investment and ownership decisions”, said a spokesperson for BSI. 

“This PAS has been produced by a steering group of financial services industry representatives and associated organisations. It aims to facilitate shared understanding and collaboration in the global finance sector around sustainability.” 

Another strand of the BSI’s Finance Standardisation Programme is its appointment as secretariat of the International Standards Organisation’s (ISO) new technical committee known as ‘322 Sustainable Finance’, whose broad aim is to achieve “standardisation in the field of sustainable finance to integrate sustainability considerations including ESG practices in the financing of economic activities”.

According to BSI’s website its work on the PASs will help inform the work being undertaken” by the by ISO technical committee.

Last month, RI reported that a working group attached to that committee began its work creating a “standard on sustainable finance” in China, in a bid to provide global guidelines for investors, banks, insurers, consultants, regulators and governments. 

ISO is the world’s official standards body, affiliated with the World Trade Organisation and the UN’s Economic and Social Council and representing more than 160 national standards bodies. It is behind more than 21,000 global standards so far, and has been increasingly engaged with ESG, making efforts to develop standards for green bond standards and climate finance over the past couple of years.

Its Technical Committee was set up in 2018 by the BSI and has 22 countries participating in its work, including China, the US, Russia, France, Germany, Sweden and Japan. 

The new guide was produced with support from a steering group of financial services industry representatives and associated organisations, including:

  • CFA Society of the UK
  • Department for Business, Energy & Industrial Strategy (BEIS) 
  • E3G
  • IKEN Associates
  • Institute of Chartered Accountants in England and Wales
  • Institute of Environmental Management & Assessment (IEMA)
  • Lloyds Banking Group
  • P1 Investment Management
  • Smith School Oxford 
  • Sustainalytics
  • Tideway
  • UK Sustainable Investment and Finance Association (UKSIF)
  • PRI Association
  • WHEB Group
  • WWF UK