esg integrated disclosure project
As such, there is no one set of metrics that properly covers all ESG issues for all companies. JP Morgan estimated that assets in ESG funds doubled in 2020, to over $7.2 trillion. Jiri Krol, Global Head of the Alternative Credit Council, said: SMEs and mid-market businesses require a more proportionate approach to ESG disclosure than large public corporates. environmental, social and ethical-related disclosures in the annual or integrated reports of a sample of mining companies in South Africa. The importance of debate on issues of such consequence should be a point of general agreement. Moving from an "annual and manual" reporting process to a dynamic and frequent process with reliable and decision-useful information is essential for companies to . We look forward to working with our members and partners to support the widespread adoption of this disclosure template., Tess Virmani, Executive VP and Head of ESG at LSTA, said: Investors and regulators have made it clear that the status quo is untenable, and the credit market recognizes the need for harmonized ESG reporting. For example, CDP Global reports that in 2020, 515 investors with $106 trillion in assets and over 147 large purchasers with over $4 trillion in procurement spend have requested companies disclose their environmental data through CDP. The U.S. Securities and Exchange Commission has indicated that ESG disclosure regulation will be a central focus of recently confirmed SEC Chair Gary Gensler's tenure. A letter recently arrived at my office advocating for mandatory ESG disclosures and ended by saying: There is no Planet B. The question, for now, is whether policy goals that may be considered important to society are beyond the SECs current mandate absent legislative action, or whether such initiatives would be a natural progression consistent with recent developments in the prevailing view of corporate purpose. A number of different stakeholders, including asset owners, asset managers and proxy advisory firms, are increasing pressure on companies to embrace disclosure more robustly. According to the ESG IDP, the new template aims to enhance transparency and consistency for private companies as well as for credit investors by providing a standard format for ESG-related disclosures. The ACC is an affiliate of AIMA and is governed by its own board which ultimately reports to the AIMA Council. As we noted in an earlier article, there is a key distinction to be drawn between important information and material information. Effective disclosure would allow stakeholders to understand both the potential upside opportunities and the downside risks to balance sheets across the corporate landscape, and would allow capital to be better allocated to fund sustainable solutions. Raising the quality of ESG disclosures to the point where they can be filed or furnished will be a daunting task for many issuers, and it may take years for companies to integrate and combine systems in order to generate certain types of data. ESG Integrated Disclosure Project Download Template Now The ESG Integrated Disclosure Project (ESG IDP) is an industry initiative bringing together leading lenders in the private credit and syndicated loan markets to improve transparency and accountability. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here);For Whom Corporate Leaders Bargainby Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forumhere);Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here); andRestoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rockby Leo E. Strine, Jr. (discussed on the Forumhere). The LMA are delighted to support such a valuable project.. The ESG IDP is also supported by a coalition of market stakeholders including CDP, the ESG Data Convergence Initiative and the Loan Market Association. 17 Mar 2023 Financial Services How software-driven revolution will redefine the automotive industry 17 Mar 2023 Automotive (go back), 5See Climate Disclosure Standards Board, CDSB Framework (December 2019), available here. The SDGs are accompanied by a total of 169 associated targets and 232 approved indicators. The goal of harmonizing and standardizing ESG information requests is to establish a global baseline of ESG information across credit markets. 167 Fleet Street, London, EC4A 2EA, United Kingdom. Profile Advisors for LSTARich Myersrmyers@profileadvisors.com, AIMADrew NicolAssociate Director, Research and Communicationsdnicol@aima.org, PRIRojn KiadehActing Head of Pressrojin.kiadeh@unpri.org, Apollo Global ManagementJoanna RoseGlobal Head of Corporate Communicationscommunications@apollo.com, Oak Hill AdvisorsNatalie HarvardHead of Investor Relations & Partnernharvard@oakhilladvisors.com. While no outcome will satisfy all participants, it is essential that the decision-making process be viewed as legitimate by both the regulators and the regulated. Click here to view the playback from this session. They provide finance to mid-market corporates, SMEs, commercial and residential real estate developments, infrastructure as well the trade and receivables business. Companies would also do well to monitor disclosure trends and evaluate if they have the internal capacity to meet emerging reporting demands and requirements. We believe that the most useful ESG disclosures will be grounded in the specific issues that are relevant to the particular company, as opposed to generic ESG disclosures that may or may not apply in a companys individual circumstances.. The group also said the executive committee spearheading the project will review the template and make any necessary updates on an annual basis. The Executive Committee of the ESG Integrated Disclosure Project will review the template and make any necessary updates on an annual basis. Investors are increasingly recognising the need for biodiversity and nature-related data, even as still nascent information streams prove difficult to navigate. The project is led by the Alternative Credit Council-the private credit affiliate of the Alternative Investment Management Association-the . It was natural that these global efforts, dating back some years, would focus on disclosure. Conflicts in CLOs: Non-Existence is No Excuse! To learn more, including how to block cookies, read our privacy policy. We believe that the technology-enabled disclosure of the EDCI metrics within the template will provide better information for both LPs and GPs to drive improvements over time on critical issues., Radhika Mehrotra, Associate Director, Capital Markets, CDP North America, said: CDP recognizes the value of the ESG Integrated Disclosure Project (ESG IDP) and how it aims to increase the availability and comparability of material ESG disclosure for both LPs and GPs investing in the private and broadly syndicated credit markets., Gemma Lawrence-Pardew, Head of Sustainability, Director Legal, Loan Market Association, stated: Reliable and accurate ESG information is vital in order for investors to channel capital into sustainable activities and companies. The ACCs core objectives are to provide guidance on policy and regulatory matters, support wider advocacy and educational efforts and generate industry research with the view to strengthening the sectors sustainability and wider economic and financial benefits. At the top of the agenda is climate change disclosure, and the Commission is taking steps toward broader reform. (go back), 3Tim Human, Two thirds of FTSE 100 mention TCFD in reporting, finds research, Investor Relations Magazine (June 17, 2020), available here. Jointhe ESG Today daily newsletter and get all the top ESG stories, like this one. project for the title at FGV EAESP. Collapse of SVB and What it Means for the Loan Market, 2023 LSTA and LMA Joint London Conference, Secondary Market Monthly: February 2023 Summary, A Perfect Storm? In doing so, the paper contributes to the general body of . By simplifying and harmonizing existing market practices, this new industry-led initiative will reduce the burden on borrowers while improving the materiality and comparability of ESG disclosure for investors, Ji Krl, global head of the Alternative Credit Council,said in a statement. The LSTA undertakes a wide variety of activities to foster the development of policies and market practices designed to promote just and equitable marketplace principles and to encourage cooperation and coordination with firms facilitating transactions in loans. While the SEC traditionally has required disclosure of financially material information, its new leaders are clearly considering requiring reporting of ESG-related information whether or not it is financially material. Signatories to the PRI commit to adopt and implement its six aspirational principles (the Principles): to incorporate ESG issues into investment analysis and decision-making processes; be active owners and incorporate ESG issues into asset ownership policies and practices; seek appropriate disclosures on ESG issues by investee companies; promote acceptance and implementation of the Principles within the investment industry; work together to enhance our effectiveness in implementing the Principles; and. Copyright 2023 Asset International, Inc. All Rights Reserved. The Executive Committee of the ESG Integrated Disclosure Project will review the template and make any necessary updates on an annual basis. Within the scope of its mandate, the SEC has a responsibility to be deliberate and transparent in its ESG rulemaking to minimize the costs of regulatory risk. Key takeaways. As outlined in SASBs recent SEC comment letter: Climate risk can be broken down into three broad categories: physical (e.g., extreme weather), transition (e.g., technological and market shifts), and regulatory (e.g., government imposition of carbon price or other regulation). If the SEC intends to require broad ESG disclosure, it should be candid about its goals and provide a solid basis for any rulemaking initiatives, so that it does not exacerbate regulatory risk. We would like to express our deep gratitude to Professor . Instead, any investor complaints regarding these disclosures should arise from, and be limited by, traditional materiality principles. Substantively, the mission of the SEC is viewed as politically neutral. The template is the creation of the ESG IDP, an industry initiative bringing together leading lenders in the private and syndicated credit markets to improve transparency and accountability. The SEC appears to view its invitation for public input on climate change disclosure, which remains open until the middle of June, as the beginning of a potentially significant reconfiguration of corporate reporting on ESG matters in the near future. The LSTA is a not-for-profit trade association that is made up of a broad and diverse membership involved in the origination, syndication, and trade of corporate loans. [Source]. These new metrics help promote greater harmonization and consistency of disclosure of key ESG indicators for borrowers in private credit and syndicated loan transactions. (3) Instill a culture of acting lawfully, ethically, and responsibly. The ESG IDP was formed by the Alternative Credit Council (ACC), the private credit affiliate of the Alternative Investment Management Association (AIMA), the Loan Syndications and Trading Association (LSTA), and the United Nations-supported Principles for Responsible Investment (PRI) in co-operation with a group of leading alternative asset managers and credit investors. It is time for substantive public consideration of the best path forward for ESG regulation in the American economy, including but not limited to the proper scope of reporting requirements. Key ESG indicators for borrowers in private credit and syndicated loan transactions Asset International, Inc. all Rights.! Ethically, and responsibly, there is no one set of metrics that covers! By a total of 169 associated targets and 232 approved indicators affiliate of AIMA is... Support such a valuable project daily newsletter and get all the top of the agenda is climate change disclosure and. 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