A series of briefings that take a bite-size look at international trends in different jurisdictions, drawing on Baker McKenzie's expert financial services practitioners with local market knowledge.
This edition takes a bite-size look at the latest environment, social and governance (ESG) developments in Brazil, the European Union, Belgium, Hong Kong SAR, Japan, Singapore, Thailand, and the United Kingdom.
Since we looked at ESG in our July 2021 edition, significant progress has been made internationally on creating a regulatory framework.
- As was the case then, there are still widely different rates of progress, but international standards are now firmly entrenched and many jurisdictions besides the EU have either enacted compulsory rules on reporting and disclosure or are in the process of doing so.
- We are now seeing actual implementation and firms dealing with the complexities, such as over how green to label funds.
- Other areas coming to the fore include a focus on the quality of ESG data from corporates on which financial institutions rely to make their disclosures.
- That said, leaders in the financial sector are without doubt most concerned about the risk of litigation and enforcement action arising out of allegations of green washing. Terms such as "green hushing" and "green bleaching" have emerged where businesses choose to remain silent about or downplay their firms' or products' ESG attributes. The US, where regulation is enforcement-led, is out in front but other jurisdictions are starting to see cases being brought.
- While ESG potentially brings financial institutions opportunities to grow their business, the risks require careful governance and management.
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