How ESG regulation is transforming global financial services

Global financial services have undergone a significant shift in recent times. The Environmental, Social and Governance (ESG) movement has motivated investors from solely prioritising returns to considering a company’s ESG risks. The economic prosperity of a country is tied to the development of greener products and services as well as its efforts in reaching net zero.

The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

CUBE’s previous data-driven ESG report, demonstrated how the environment aspect of ESG has been substantial and a response to climate change risk being at its peak. CUBE's recent report on ESG landscape explores 52,920 regulatory data points to identify global trends and understand which countries are the most serious about ESG. It has found that in the last five years, despite events such as Russia’s war and inflation slowing down the progress for ESG in 2022, there have been notable strides from nations.

Key findings from CUBE’s data

  • 43 per cent of all ESG-related regulatory content references ‘Environmental, Social and Governance’ or ‘ESG’ in last 5 years and a further 30 per cent were references to ‘sustainability.’
  • There have been major advances in sustainability and greenwashing regulations – this demonstrates regulators’ focus on ESG.
  • Of the 52,920 ESG-related issuances explored, 57 per cent were referenced by European issuing bodies.
  • There have also been noticeable developments from Indonesia, the US, Japan, and the UK. But are regulators practising what they preach? Find out in CUBE's report.  

Global ESG harmony: can it be achieved?

As countries have differing interpretations and agendas for ESG, regulations tend to vary. To adequately implement ESG on a global scale, there needs to be a degree of collaboration from governments and regulators worldwide. Fragmentation of regulation only hinders ESG progress.

There have been instances of international initiatives such as the Task Force on Climate-Related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB), which aim to promote sustainable business practices, providing guidance and raising awareness. However, currently these are voluntary. If these initiatives were compulsory, ESG would gain significant momentum.

What’s on the horizon for ESG?

As ESG continues to gain traction, a clearly defined ESG strategy will no longer be optional. Based on CUBE’s data, it is important that firms act now and incorporate ESG principles into their business models before regulators increase scrutiny.

To find out more, download CUBE’s latest industry data report: “An Analyst’s guide to the evolution of ESG.”

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