2024 is set usher in a new wave of ESG regulations in both the UK and the EU. At the end of Q4/23, the FCA finalised its rules regarding its Sustainability Disclosure Requirements (SDR). The goal of these requirements is to help firms operating within the UK’s asset management sector to improve their sustainability information to which consumers have access, and overcoming issues surrounding greenwashing. Key considerations of the SDR include the introduction of sustainable investment labels, disclosure requirements and limitations on using terms related to sustainability within marketing and product naming.
In Europe, the Corporate Sustainability Reporting Directive (CSRD) will come into effect at the start of the year. This means that nearly 50,000 firms will be obligated to carry out sustainability reporting and this is inclusive of non-EU companies that have subsidiaries operating in the EU or are listed on regulated markets. The first CSRD reports will be expected in 2025.
ESG Regulatory Developments
ESG regulations have been growing year on year; research from the data management firm ESG Book has shown that it has increased by 155% over the last decade, reflecting the rapid development of regulatory policies surrounding ESG investments. Last year, however, was a pivotal year for ESG disclosure frameworks and regulations. Notable frameworks developed include the first set of European Sustainability Reporting Standards (ESRS) in July, Sustainability Disclosure Standards published by the International Sustainability Standards Board (ISSB) in June, and the Disclosure Framework published by TPT (Transition Plan Taskforce) in the UK in October.
As firms look to the year ahead, key priorities for 2024 include:
- Stepping up data management
As firms look to push business growth in 2024, they will need to prioritise their data management and reporting strategies due to the greater levels of data to report on. According to KMPG, from the start of 2024, companies will be obligated to report on more than hundreds of ESG metrics and targets. As a consequence, firms will be required to place greater consideration on their data management strategy. This will be a complex task that will need continual refinment as regulations continue to change.
- Keeping an eye on both short-term and long-term planning
According to John McCalla-Leacy, Head of Global ESG KPMG International and Head of ESG UK, ‘firms need to continue to make urgent progress with their ESG reporting in a manner that supports both short-term and long-term business goals’. Firms will therefore need to lay solid foundations for their data management and reporting processes, so that they can achieve long term success and remain compliant with FCA standards.
2024 looks to be a promising year for ESG reporting. At Alternit One, we are proud to be helping our clients build data management and reporting strategies that not only empower the firm to make critical decisions regarding investments, but adhere to the increasing demands from the regulator.