The IIF has submitted a response letter to IOSCO Consultation Report entitled “Sustainable finance in emerging markets and the role of securities regulators.” In the letter, we highlight a number of key issues including the following:
• Risk of Fragmentation: Given the nature of climate change—which can have devastating external consequences across jurisdictions—as well as the cross-border nature of sustainable finance instruments, we believe that efforts to build a consistent and well-aligned framework for taxonomy and disclosure at the international level are imperative. At present, regulations, guidance and standards under development in different parts of the world can differ, highlighting the need to avoid fragmentation—which is not only costly but can pose risks for financial stability, and ultimately economic growth. In this letter, the IIF underscores the importance of enhanced global coordination and cooperation.
• Limitations of available data, risk assessment methodology: While the Consultation Report reiterates the need for mandatory disclosure requirements, we believe that the current voluntary approach is more feasible given limitations posed by the availability of data and appropriate methodology. Before consideration of mandatory disclosure, firms need have the capacity to effectively assess risks and opportunities from climate change and broader ESG considerations, based on reliable data and with appropriate methodology. Without this capacity, disclosures may end up being misleading from a user perspective.