Global guidelines on corporate climate reporting must fall in line with those in Europe and the US or investors could be hit by fragmented and inconsistent information, the European Central Bank and IMF have warned.
Financial institutions globally are looking to establish standards for corporate climate reporting in a bid to stamp out ‘greenwashing’, with Frankfurt-based International Sustainability Standards Board (ISSB) proposing global “baseline” measures.
But the European Union and the US Securities and Exchange Commission are already drafting standards for climate guidelines, prompting the International Monetary Fund to warn there needed to be coordination and alignment between the sets of rules.
“Interoperability between the forthcoming ISSB standards and jurisdictional requirements remains one of the largest challenges that harmonization work ultimately faces,” the IMF said.
“It is important to avoid further fragmentation.”
The warnings come after the London Stock Exchange Group, which required listed firms to comply with ISSB disclosures, said multiple standards at the same time risked splintering the supply of information to investors.
The group has warned it has identified several key differences in definitions used in climate terms by the EU and ISSB.
The ECB added to calls and said that in order to meet users’ expectations, the ISSB and other standard setters needed to “iron out” differences and come up with baseline standards which are widely implemented globally.
Watchdogs in the UK have issued similar warnings and backed internationally aligned standards as they look to clampdown on the prevalence of greenwashing and bring ‘environmental, social and governance’ (ESG) ratings under regulation.
The FCA said in June that it would “strongly support” an internationally coordinated approach to the regulation of ESG data and ratings.
Scrutiny of ESG-labelled products for investors has grown in the past year over fears of greenwashing and a lack of standardisation in the industry.