Creating a climate of change digest

The Principles for Sustainable Trade Finance (PSTF) provide guidance for three types of trade finance products: Green Trade Finance (GTF), Sustainability-linked Trade Finance, and Sustainability-linked Supply Chain Finance (SLSCF). PSTF also outlines ICC’s plan to release specific principles for Social Trade Finance, addressing critical socioeconomic issues like labor rights, human rights, and economic development. The PGTF and the upcoming Principles for Social Trade Finance will be the two use-of-proceeds components of the broader ICC Principles for Sustainable Trade (PST).

The ICC principles align with global standards, including the Loan Market Association’s Green Loan Principles, the EU Taxonomy, and the UN Sustainable Development Goals. To aid implementation, ICC offers tools such as green activity lists, code-mapping resources, and a sustainable credentials library.

On November 4, 2024, the US Securities and Exchange Commission (SEC) issued a risk alert to registered investment companies, including mutual funds, ETFs, and unit investment trusts managing over 15,000 portfolios. The alert, issued by the SEC’s Division of Examinations, aims to assist investment companies and their advisers in compliance efforts and preparation for examinations. It outlines a risk-based approach for examination selection, considering fund-specific and adviser-specific risk factors such as business activities, conflicts of interest, and regulatory history. The alert specifies that examinations will review the effectiveness of compliance policies and procedures, board governance processes, the thoroughness of the board’s review of fund fees, and the appropriateness of fund disclosures in regulatory filings and communications. Common deficiencies in these areas were highlighted. The alert also details the initial information that may be requested during examinations and includes an attachment titled “Typical Initial Information Examiners Request of Certain RICs and Their Advisers” to aid in the examination process. 

Scott O’Malia, CEO of the International Swaps and Derivatives Association (ISDA), emphasized the need for robust and consistent standards for a voluntary carbon market to help transition to a net-zero economy and reduce carbon emissions. O’Malia outlined five key recommendations for creating an efficient voluntary carbon market:

1. Establishing a globally consistent and widely adopted definition of a “ton of carbon.”
2. Developing a robust legal framework to ensure greater certainty and confidence in trading voluntary carbon credits.
3. Clarifying the accounting treatment for voluntary carbon credits (VCCs).
4. Creating a liquid forward market for VCCs.
5. Implementing a globally consistent regulatory framework for the voluntary carbon market.

These recommendations were presented at a recent meeting of the Sustainable Finance Task Force of the International Organization of Securities Commissions (IOSCO). O’Malia urged policymakers to consider these recommendations to develop a vibrant and efficient voluntary carbon market and to collaborate with ISDA on their implementation.

On November 12, 2024, the Financial Stability Board (FSB) released its 2024 progress report on achieving consistent and comparable climate-related disclosures. The report is based on a survey of FSB member jurisdictions and input from standard-setting bodies and international organizations. The report outlines the progress made by the International Sustainability Standards Board (ISSB) and other standard-setting bodies (SSBs) and international organizations in assisting jurisdictions and companies in adopting the new ISSB Standards (IFRS S1 and IFRS S2). It also details the advancements by FSB member jurisdictions in climate-related disclosure practices and corporate climate-related disclosures. Additionally, the report provides information on jurisdictions that have established or are establishing structures or processes to integrate the ISSB Standards into local requirements.

IOSCO issued a statement supporting the IAASB’s International Standard on Sustainability Assurance (ISSA) 5000, approved in September 2024. ISSA 5000 replaces ISAE 3000 (revised) as the preferred framework for sustainability assurance, covering climate-related risks, emissions data, and social and governance metrics. IOSCO had previously outlined key considerations for a global assurance framework in a March 2023 report and commented on the proposed ISSA 5000 in December 2023, which were addressed in the final standard. IOSCO believes ISSA 5000 will enhance the consistency, comparability, and reliability of sustainability-related information, and urged its members to consider applying or being informed by the IAASB’s global sustainability assurance standard when setting assurance requirements or permissions within their jurisdictions.

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