George Anastasi, Senior Policy Manager
In today's business landscape, the call for sustainable practices is louder than ever before. Regulators, shareholders, and customers are increasingly demanding that businesses measure and monitor their environmental and social impacts. This heightened scrutiny has given rise to a proliferation of Environmental, Social, and Governance (ESG) reporting frameworks, metrics, and disclosure requirements.
While these initiatives aim to foster transparency and responsible practices, they have also led to a complex and fragmented reporting landscape, posing challenges for businesses and finance providers alike. Companies are often faced with the challenge of choosing the most relevant and applicable reporting standards for their operations. Complying with multiple frameworks can be time-consuming and resource-intensive, diverting attention and resources away from core business activities.
For asset finance providers, the complexities of the ESG reporting landscape present additional challenges. Not only are they required to assess their own businesses' sustainability performance, but they must also evaluate the environmental and social impacts of the companies and assets they fund. For example, under most reporting frameworks, a funder’s leases are included as part of its Scope 3 emissions. This means that the emissions associated with the assets they fund need to be considered.
This added responsibility comes with costs for funders. The need to track and report on the sustainability performance of their funded assets can lead to increased administrative burden and a plethora of standards doesn’t help. But ESG reporting can be an opportunity rather than a burden.
The UK Government can play a role as a global leader in actively promoting international alignment and collaboration on ESG reporting standards. By engaging with international counterparts, such as the International Financial Reporting Standards (IFRS) Foundation and other regulatory bodies, the government can contribute to the development of globally recognised reporting frameworks. This collaboration will help reduce fragmentation, minimise reporting discrepancies, and enhance comparability across borders. This work can align with the Government's existing Green Finance Strategy.
This would support businesses seeking to go green by ensuring they are accountable, but with the right standards.
To find out more about our policies for ESG reporting please click here.
Published 17 Aug 2023