International Organization of Securities Commissions Consults on Sustainable Finance in Emerging Markets

The International Organization of Securities Commissions has launched a consultation on sustainable finance in emerging markets and the role of securities regulators. The consultation discusses the challenges affecting the development of sustainable finance in capital markets, focusing on sustainable assets in emerging markets and measures to facilitate market development in this area. Responses to the consultation can be submitted by April 1, 2019.

IOSCO proposes 11 recommendations for member jurisdictions to consider when issuing regulations or guidance on sustainable instruments and additional disclosure requirements of environmental, social and governance risks. The proposed recommendations are:

1. Issuers and other regulated entities should integrate ESG-specific issues, where these are material, in the overall risk appetite and governance of these entities.
2. Regulators should require disclosure with regard to material ESG-specific risks (including transition risks) and opportunities in relation to governance, strategy and risk management of an issuer or collective investment scheme.
3. Where regulators determine that additional ESG-specific reporting is needed, regulators should aim to ensure adequate data quality for ESG-specific reporting.
4. Sustainable instruments should be clearly defined and should refer to the categories of eligible projects and assets for which the funds raised through their issuance can be used.
5. Funds raised through sustainable instruments should be used for projects and activities within a specified set of ESG categories.
6. Regulators should establish requirements for the offerings of sustainable instruments.
7. Regulators should establish ongoing disclosure requirements regarding the use of the funds raised through the issuance of sustainable instruments including the extent of unutilized funds, if any.
8. Regulation should provide for measures to prevent, detect and sanction the misuse of the funds raised through the issuance of sustainable instruments.
9. Issuers should consider the use of external reviews to ensure consistency with the definition of the sustainable instruments.
10. Institutional investors should incorporate ESG-specific issues into their investment analysis, strategies and overall governance, and take into account material ESG disclosures of the entities in which they invest.
11. Regulators should analyze the gaps in capacity and expertise with regard to ESG-related issues mentioned in the recommendations and consider targeted capacity building to address these gaps.

View the consultation paper.

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