Following regulators’ warnings about fragmented capital markets, the European Union sought to reassure international companies this week that it would seek to align its disclosure sustainability rules with a global initiative.
The EU is nearing completion of mandatory environment, social, and governance (ESG) disclosures for approximately 50,000 companies across the bloc. It is an effort to reduce ‘greenwashing.’ Greenwashing is exaggerated climate-friendly claims made to attract investors.
No more greenwashing
The International Sustainability Standards Board (ISSB) is developing global baseline standards for corporate climate disclosures for non-EU countries. Among them is the United Kingdom. The United States is developing its own disclosure rules.
Mairead McGuinness, the EU’s financial services commissioner, said that she is aware that Europe is ahead, leading the way, and wants to demonstrate leadership. But, she also said that the EU is acutely aware too of the need for global coordination and cooperation.
The EU’s disclosures have a basis on what’s already there. The drafts are due this month. The EU will contribute to global standardization initiatives. This is what McGuinness said at a Central Bank of Ireland conference.
The absence of a common approach and sustainability rules makes difficulties
Companies and regulators have stated that there is an absence of a common approach to terminology. EU and ISSB have different terminology. Exactly this makes it more difficult for investors to compare companies.
McGuinness insisted that the EU wants to see as much alignment as possible with the work of the International Sustainability Standards Board. She repeated that it will be so even though Europe is likely to go further and faster to meet its higher climate ambitions.
She is advancing the EU’s green plans by determining how to best encourage sustainable retail lending for small businesses and households.
McGuinness stated that with the support of the European Banking Authority, the EU administration makes an investigation. EU must know what is needed to promote the growth of green loans and green mortgages.