Financial activities across the globe have a vital role to play in the transition to a sustainable global economy. The field of sustainable finance is developing rapidly to support innovative business models that resolve the sustainability challenge, tackling poverty, inequality, climate change, environmental degradation and aiming to grow equitable prosperity. However, the lack of globally agreed definitions and 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 standardization in the field of sustainable finance to integrate sustainability considerations including environmental, social and governance practices in the financing of economic activities. ISO standard 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 key sustainability principles, practices, and terminology.
In November 2019, IEMA organised an introductory IEMA webinar on the aims of ISO Standard 32210 led by the standard convenor Hayden Morgan (FIEMA) of Green Investment Group. Building on this previous engagement, IEMA used its liaison status in ISO TC 322 to organise an October roundtable discussion to review the committee draft of ISO 32210 released this Autumn.
The roundtable, held on 2nd October 2020, brought together a wide range of IEMA experts working in the UK and abroad with the financial sector and associated professions such as insurance to help inform the IEMA comments on the draft standard as part of this advance consultation process.
In its official 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 intended audience of this guidance standard and the need to include alignment to the recommendations of the Task Force on Climate-related Financial Disclosures and the Paris Agreement. It noted this would ensure that companies develop a strategy allowing them to structure investment in accordance with sustainability policy developments. IEMA also highlighted missing gaps in the document, including the lack of coverage of social issues, a crucial role in sustainability. IEMA therefore called for the standard to reflect more content that would ensure that social impacts are managed, and social benefits are maximised.
On the topic of definitions, IEMA noted the lack of key 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 ISO 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 to them 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 view IEMA's comments here.
Posted on 15th October 2020
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