Among the most prolific rulemakers was the European Union. It began to roll out sustainability rules for asset managers as part of its drive toward hitting its climate targets. Regulatory scrutiny also broadened to take in investment ratings, and the labelling of sustainable investment funds.
As trillions of dollars flow into businesses touting their environmental, social and governance credentials, worries about 'greenwashing' or inflated climate-friendly claims are multiplying. Regulators are pushing for clearer market guard rails, without which it's hard to punish bad practice. Although 2022 saw that begin to change.
In the U.S. both Goldman Sachs and BNY Mellon divisions were fined over ESG failures. German asset manager DWS was raided and its chief executive stepped down after allegations it misled investors.
Glencore, KLM and Shell were among the companies who faced legal or regulatory challenge in the last 12 months. Very soon corporations will no longer be able to hide behind an unregulated patchwork of voluntary norms. In 2023, the EU, U.S.
and the new International Sustainability Standards Board, or ISSB, will finalize climate-related disclosure rules for companies. The ESG rules will also fast become mandatory rather than optional. With so many guidelines popping up, a key task of regulators globally will be how they all sync together.
The ISSB will also push forward a global reporting baseline, making it easier for investors to compare corporate efforts.