Difference of Climate Regulations Throughout the World

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Introduction

The issue of climate change has become an undeniable global concern, leading to a significant shift in regulatory frameworks and standards across the world. As the consequences of a warming planet continue to manifest, governments, international organizations, and businesses are recognizing the urgent need to address climate-related risks, reduce greenhouse gas emissions, and foster sustainability. This widespread realization has triggered a domino effect, propelling the adoption of climate regulation in various forms across nations, industries, and sectors. In this discussion, we will explore how climate regulation has proliferated around the globe, reshaping the way we address environmental challenges and paving the way for a more sustainable future.

Taken from The Climate Choice

United States

The US Securities and Exchange Commission (SEC) is set to introduce a climate disclosure rule mandating large companies to reveal their carbon footprints, aligning with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). This rule will require the disclosure of greenhouse gas emissions (Scopes 1, 2, and 3), climate-related risks, impacts, targets, and goals alongside financial statements. Additionally, the US Commodity Futures Trading Commission is organizing a second voluntary carbon markets meeting to address private sector efforts in high-quality carbon credits, market trends, public sector initiatives, and the facilitation of high-quality carbon credit derivatives markets.

The International Sustainability Standards Board (ISSB) will take over the responsibility of monitoring companies' climate-related disclosures from the FSB Task Force on Climate-related Financial Disclosures (TCFD). This transition follows the ISSB's publication of global standards for sustainability and climate reporting, which integrated TCFD recommendations. While the move aims to unify sustainability reporting standards, some may raise concerns about the ISSB's expanded role affecting its independence. Nevertheless, it acknowledges the ISSB's dedication to building on TCFD's legacy and enhancing clarity in climate-related initiatives.

Europe

The European Commission is proposing to simplify Climate and ESG disclosure rules for companies to lessen regulatory burdens. On July 31, it released the final version of the European Sustainability Reporting Standards (ESRS). The new climate regulation relocates previously mandatory indicators, such as greenhouse gas emissions disclosures, into materiality assessments, making them reportable only if they are relevant to a specific company.

Under the Corporate Sustainability Reporting Directive (CSRD), companies are required to establish processes for gathering and evaluating climate-related data, both for their operations and supply chains. This information must adhere to the European Sustainability Reporting Standards (ESRS) and encompass short-, medium-, and long-term impacts. The directive also aligns with the proposed Corporate Sustainability Due Diligence Directive (CSDD), enhancing comprehensive reporting throughout global value chains and linking director remuneration to sustainability targets. The European Financial Reporting Advisory Group (EFRAG) has introduced sector-specific Sustainability Reporting by creating advisory panels for tailored reporting guidance in the capital markets and insurance sectors, starting in September with applications accepted until July 31.

Australia

The Australian Government has implemented mandatory Climate-Related Financial Disclosure Requirements for businesses and financial institutions. These regulations align closely with the climate standards set by the International Sustainability Standards Board (ISSB) and cover areas such as governance, strategy, risk management, and metrics and targets. The proposed start date for these regulations is the beginning of the 2024/2025 financial year.

Singapore

The Monetary Authority of Singapore (MAS) is pushing for the early retirement of coal-fired power plants. MAS has initiated a public consultation on including funding for the early phase-out of coal-fired power plants in the Singapore-Asia Taxonomy, which categorizes investments that support a 1.5°C transition pathway.

International

The International Sustainability Standards Board (ISSB) has issued its initial sustainability and climate disclosure rules, IFRS S1 and IFRS S2, derived from voluntary reporting frameworks. These standards are designed to provide a comprehensive and comparable way of presenting sustainability initiatives, aiding investors in making informed capital allocation decisions. Several countries, including Canada, the UK, Japan, Singapore, and Nigeria, are contemplating the adoption of ISSB standards. Additionally, the International Organization of Securities Commissions (IOSCO) is endorsing these standards, further speeding up their global adoption.

Global regulators are increasingly focused on addressing climate-related risks and improving reporting. Businesses should pay attention to the growing demand for climate management practices and play a part in creating a more sustainable and resilient future. Keep an eye out for updates on the global climate change efforts.