Evolving Regulatory Environment
SEPTEMBER 2021
Almost exactly 12 months ago, the Head of ISS ESG, Max Horster, titled the first of his 10 Lessons From 10 Years of Helping Investors to Tackle Climate Change “Its the Regulator, stupid!”. These words have been borne out throughout 2021, with regulators around the world paying increasing interest not only to the topic of climate change, but perhaps more importantly to the role of the responsible investment industry more broadly.
While it is encouraging to see policy development in this area, global investors do face the potential of an increasing body of overlapping and potentially even conflicting regulations, as different jurisdictions look to develop their own local approaches.
ISS ESG is responding to these pressures with the development of significant enhancements to its Regulatory Solutions offering, including portfolio taxonomy alignment analysis and assessment of portfolio exposure to the EU’s Principal Adverse Impact indictors. This set of solutions will be discussed in more detail at an upcoming webinar on the 21st September featuring industry and ISS ESG panelists – you can register for this event on this link.
ISS ESG isn’t just a passive audience for these developments – our team members participate in and provide practical and in-principle support for a range of industry bodies and initiatives that play a role in policy development, as well as providing feedback to relevant regulatory requests for submissions. Please reach out to our team if you’re interested in hearing more about our activities in these areas. Regulatory issues were front and center in an ISS ESG commentary piece warning of the risks of greenwash arising from injudicious use of the term ‘impact’ in sustainable fund marketing. And our team member Tom Harding will also be speaking on the topic: ‘The regulatory agenda – disclosure preparedness and global regulatory advances’ at the upcoming Future of ESG Data 2021 virtual conference.
ISS ESG’s regular InFocus report for July offers a deep dive into the ESG risks and opportunities for investors in the Real Estate sector. In other thought leadership work, detailed analysis was carried out on the importance of supply chain risks for Japanese companies; and our screening team examined the fascinating phenomenon of increasing proportions of military revenue for aerospace companies hard hit by the COVID-19 pandemic. Our US Municipal Bonds team also provided a detailed explanation of the relevance of ESG factors to this importance part of the fixed income universe.
The recent release of the IPCC report highlights the urgency of climate change risks, and in a new series of Climate Stress Test papers the ISS ESG Climate team looks at the issue from the perspective of loan book exposure. And our screening team has published a very timely explainer on the ESG risks associated with oral nicotine products – preparing our clients for this issue just prior to a significant uptick in related regulatory action!
We hope that this edition of the ESG Digest offers some practical tools and useful tips to aid in your own responsible investment journey!