IEMA response to sustainable finance standard
Financial activities have a vital role to play in the transition to a sustainable global economy
Sustainable finance is developing rapidly to support business models that resolve the sustainability challenge, tackling poverty, inequality, climate change and environmental degradation, and aiming to grow prosperity. However, varying interpretations of what constitutes good practice causes confusion and erodes market confidence.
Formed in February 2019, the ISO Technical Committee (TC) 322 on Sustainable Finance looks to achieve standardisation in this field, in order to integrate sustainability considerations into the financing of economic activities. ISO 32210: Framework for sustainable finance – Principles and guidance forms part of the committee work that seeks to encourage innovative sustainable financial products and initiatives while providing guidance on sustainability principles, practices and terminology.
In November 2019, IEMA organised an introductory IEMA webinar on the aims of ISO 32210, led by standard convenor Hayden Morgan of Green Investment Group. Building on this, IEMA used its liaison status in ISO TC 322 to organise an October roundtable discussion that would review the committee draft of ISO 32210 released this autumn.
The roundtable, held on 2 October 2020, brought together a wide range of IEMA experts working with the financial sector and associated professions such as insurance. Its aim was to inform IEMA’s response to the draft standard as part of this consultation process.
In its response, IEMA welcomed the draft standard, noting that it was a useful guidance document supporting the work set out in the British PAS 7340 – Framework for embedding the principles of sustainable finance in financial services organizations. Commenting on the issue of scope within the standard, IEMA called for greater clarity on the standard’s intended audience and the need to include alignment with the recommendations of the Task Force on Climate-related Financial Disclosures and the Paris Agreement. It noted that this would ensure companies can structure investment in accordance with sustainability policy.
IEMA also highlighted gaps in the document, including the lack of coverage of social issues. IEMA therefore called for the standard to reflect more content that would ensure social impacts are managed and social benefits are maximised. On the topic of definitions, IEMA noted the lack of sustainability definitions such as ‘circular economy’ or ‘natural capital’, which did not form part of the main body of the text. IEMA called on these definitions and those referenced in PAS 7340 to be included in the next version of the draft standard. Noting that the guidance standard should be the starting point for organisations on their journey towards sustainable finance, IEMA called for the principles to be kept short and concise, providing better clarity and working towards a common language on sustainable finance.
The draft of the standard will be made available to download at next public consultation phase. In the meantime, you can read more about the standard on p16 of this magazine, and a copy of the IEMA submission to ISO is available to read at bit.ly/3419Ius