Building transparency in sustainable finance
Disclosure requirements are the backbone of sustainable finance. They ensure that financial institutions openly share how their investment products address environmental, social, and governance (ESG) factors.
Why it matters
- Transparency: Investors and stakeholders gain insight into how sustainability risks and opportunities are managed.
- Accountability: Institutions are held responsible for their sustainability claims and practices.
- Comparability: Standardised disclosures make it easier to compare products and entities across markets.
Key features
Typically describe what, and how, information should be disclosed
Example
The EU Sustainable Finance Disclosure Regulation (SFDR) mandates that financial entities disclose how they integrate sustainability risks into investment decisions and the sustainability characteristics of their products.
RIAA Certification example
The RI Certification Standard imposes disclosure requirements for financial products seeking certification. It requires certified product providers to:
<p class="blockquote small italic"> Have formal, consistent, documented, and auditable RI strategies and processes: RI Strategies:<br />
a. are fully explained in legal product documentation such as the Product Disclosure Statement (retail), Information Memorandum or Pitchbook (wholesale)and/or equivalent documentation that supports the product, and<br/>
b. are consistently and reliably represented between the legal documentation, supplementary materials, website and other public platforms… (P1)</p>
For additional information on how this is applied in practice see: Verification - Product and service certification
Examples of other frameworks
UK Sustainability Disclosure Requirements (SDR); New Zealand climate-related disclosures (CRD) regime; EU Corporate Sustainability Reporting Directive (CSRD); IFRS Sustainability Disclosure Standards by the International Sustainability Standards Board (ISSB); Task Force on Climate-related Financial Disclosures (TCFD); Taskforce on Nature-related Financial Disclosures (TNFD); Transition Plan Taskforce (TPT) Disclosure Framework; Stewardship Codes
