How IOSCO is supporting trust in capital markets to drive sustainability
Like so many times in modern history and the history of financial markets, we are living through a truly challenging set of circumstances. However, unlike many times so far, we have a clear idea of what needs to be done to make them better, and a recognition that any potential progress requires global dialogue, systemic solutions and rapid action.
There are clear objectives ahead for the global community. The financial sector is helping the transition to a more equitable low-carbon future work in a just, trustworthy and timely way.
The International Organization of Security Commissions takes the responsibility for action from our unique position as the international standard setter for capital markets where, together with the G20 and the Financial Stability Board, we set the global regulatory reform agenda for financial markets.
In our own domain, trust is a key consideration in ensuring markets work with integrity, investors are safe from harm and the overall financial system is both stable and able to respond to emerging and evolving risks. Trust sits at the core of every initiative, every global policy proposal and every implementation effort, regardless of whether we are thinking about large or retail investors, financial power or the geographic location of our members.
Sustainable finance is no exception. The power of capital markets and the financial resources they convene could play an important part in finding the global finance needed for a sound transition while also spurring innovation and catalysing change.
Our members jointly oversee approximately 95% of the world’s capital markets. Many are based in emerging markets – those at most risk when it comes to climate change and that require the most assistance along the way.
Led by the priorities of our members, we have spent recent years working to ensure the continued soundness of capital markets as they seek to embed sustainability-related considerations throughout.
Our work in sustainable finance was built on our core objectives and aims to bring sufficient trust and integrity into the market so investors can make informed decisions about their capital allocation, all while knowing the chances of being subject to greenwashing or other mispractices are mitigated. We focus on several key aspects: data and transparency, practices for those who process, repackage or use this data to create products and sell them to others, or, more foundationally, market structures where all the trading takes place.
To ensure that sound frameworks and practices exist in each, we engage on all fronts, from corporate reporting (sustainability-related disclosure, assurance and ethics and disclosure of transition plans, where they exist) to environmental, social and governance ratings and data providers, over asset management to carbon markets and innovation in financial products and benchmarks.
Having access to reliable, timely and publicly available information is critical to well-functioning capital markets and transparency is a key category for investors. Securities regulators are central to setting corporate reporting and disclosure requirements in capital markets.
Accordingly, at IOSCO we aim to work on an ecosystem that will set out in record time a global framework for
sustainability-related disclosures and overarching assurance frameworks and ethics principles, bringing investor-
useful information to global capital markets.
On disclosure, IOSCO supported the establishment of a sustainability standards board under the International Financial Reporting Standards Foundation that will continue the work on this topic in the public interest. Subsequently, we endorsed the first two standards of the International Sustainability Standards Board in July 2023 as fit for purpose for capital markets. This endorsement has driven more than 20 jurisdictions to take steps to integrate these standards in their regulatory regimes within the first year. Together, these jurisdictions represent over 40% of global market capitalisation and more than 50% of global gross domestic product. Over
time, some 130,000 companies are expected to publish ISSB-aligned disclosures.
To date, the commitment to a global framework remains strong, proof that we are on the right path. However, for the global ecosystem to work in an aligned fashion, frameworks need to exist in ways that promote consistent and comparable climate-related and other sustainability-related disclosures for investors.
The alignment of sustainability-related disclosure standards needs to be supported by common data approaches, digital taxonomies and tagging, provided they are built on solid ground. This is why, for example, we support the work of the IFRS Foundation on digital tagging for accounting and sustainability standards.
To enhance trust in the information disclosed to the market, we also called for a robust and profession-agnostic assurance and ethics framework to be established as soon as possible and encourage the work of the global standard setters in this field. We have been impressed by the response. Both the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants will be ready this year.
We are now ensuring our members are equipped and prepared to implement such ecosystems and minimise divergencies as we progress – and, in this regard, implementation and capacity building are our key focus. Encouraged by early adopters setting the tone for others, we are maintaining open dialogue with national regulators and partnering with others to provide technical support and guidance to members to minimise fragmentation due to local adaptations.
We hope to see continued global efforts to act urgently in the public interest and minimise fragmentation without any loss of quality in reporting. A united front of international players is essential for delivery and IOSCO will ensure global securities regulators are doing their part. Like so many times in modern history and the history of financial markets, we are living through a truly challenging set of circumstances. However, unlike many times so far, we have a clear idea of what needs to be done to make them better, and a recognition that any potential progress requires global dialogue, systemic solutions and rapid action.
There are clear objectives ahead for the global community. The financial sector is helping the transition to a more equitable low-carbon future work in a just, trustworthy and timely way.
The International Organization of Security Commissions takes the responsibility for action from our unique position as the international standard setter for capital markets where, together with the G20 and the Financial Stability Board, we set the global regulatory reform agenda for financial markets.
In our own domain, trust is a key consideration in ensuring markets work with integrity, investors are safe from harm and the overall financial system is both stable and able to respond to emerging and evolving risks. Trust sits at the core of every initiative, every global policy proposal and every implementation effort, regardless of whether we are thinking about large or retail investors, financial power or the geographic location of our members.
Sustainable finance is no exception. The power of capital markets and the financial resources they convene could play an important part in finding the global finance needed for a sound transition while also spurring innovation and catalysing change. Our members jointly oversee approximately 95% of the world’s capital markets. Many are based in emerging markets – those at most risk when it comes to climate change and that require the most assistance along the way.
Led by the priorities of our members, we have spent recent years working to ensure the continued soundness of capital markets as they seek to embed sustainability-related considerations throughout.
Our work in sustainable finance was built on our core objectives and aims to bring sufficient trust and integrity into the market so investors can make informed decisions about their capital allocation, all while knowing the chances of being subject to greenwashing or other mispractices are mitigated. We focus on several key aspects: data and transparency, practices for those who process, repackage or use this data to create products and sell them to others, or, more foundationally, market structures where all the trading takes place.
To ensure that sound frameworks and practices exist in each, we engage on all fronts, from corporate reporting (sustainability-related disclosure, assurance and ethics and disclosure of transition plans, where they exist) to environmental, social and governance ratings and data providers, over asset management to carbon markets and innovation in financial products and benchmarks.
Having access to reliable, timely and publicly available information is critical to well-functioning capital markets and transparency is a key category for investors. Securities regulators are central to setting corporate reporting and disclosure requirements in capital markets.
Accordingly, at IOSCO we aim to work on an ecosystem that will set out in record time a global framework for
sustainability-related disclosures and overarching assurance frameworks and ethics principles, bringing investor-
useful information to global capital markets.
On disclosure, IOSCO supported the establishment of a sustainability standards board under the International Financial Reporting Standards Foundation that will continue the work on this topic in the public interest. Subsequently, we endorsed the first two standards of the International Sustainability Standards Board in July 2023 as fit for purpose for capital markets. This endorsement has driven more than 20 jurisdictions to take steps to integrate these standards in their regulatory regimes within the first year. Together, these jurisdictions represent over 40% of global market capitalisation and more than 50% of global gross domestic product. Over
time, some 130,000 companies are expected to publish ISSB-aligned disclosures.
To date, the commitment to a global framework remains strong, proof that we are on the right path. However, for the global ecosystem to work in an aligned fashion, frameworks need to exist in ways that promote consistent and comparable climate-related and other sustainability-related disclosures for investors.
The alignment of sustainability-related disclosure standards needs to be supported by common data approaches, digital taxonomies and tagging, provided they are built on solid ground. This is why, for example, we support the work of the IFRS Foundation on digital tagging for accounting and sustainability standards.
To enhance trust in the information disclosed to the market, we also called for a robust and profession-agnostic assurance and ethics framework to be established as soon as possible and encourage the work of the global standard setters in this field. We have been impressed by the response. Both the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants will be ready this year.
We are now ensuring our members are equipped and prepared to implement such ecosystems and minimise divergencies as we progress – and, in this regard, implementation and capacity building are our key focus. Encouraged by early adopters setting the tone for others, we are maintaining open dialogue with national regulators and partnering with others to provide technical support and guidance to members to minimise fragmentation due to local adaptations.
We hope to see continued global efforts to act urgently in the public interest and minimise fragmentation without any loss of quality in reporting. A united front of international players is essential for delivery and IOSCO will ensure global securities regulators are doing their part.
