The US Securities and Exchange Commission (SEC) has retracted its own corporate climate disclosure rule, raising concerns about the reliability and availability of ESG data.
This comes as the global market for environment, social, and governance (ESG) investing continues to grow, with sustainable debt markets growing 10% year-on-year in 2024. However, reliable corporate sustainability reporting is under increasing strain, posing a potential risk to the market’s continued expansion.
Global institutional investors are expressing growing concern over the escalating issue of corporate greenwashing, emphasizing the materiality, comparability, and accuracy of sustainability disclosures.
The EU, long seen as a global leader in shaping sustainability regulations, has voted on the first part of the “Omnibus package,” which delays ESG reporting for smaller companies until 2028. While some industry groups supported these changes, investor coalitions say they may weaken sustainability disclosure requirements, potentially hindering transparency, accountability, and the effective allocation of capital for sustainable investments.
According to Shantanu Srivastava, Lead, Sustainable Finance and Climate Risk Initiatives, IEEFA South Asia, India’s market regulator, SEBI, has taken a cautious but clear path by updating its Business Responsibility and Sustainability Reporting (BRSR) framework, allowing companies to assess or verify their BRSR core disclosures.
Mandatory third-party verification will begin with the top 500 listed companies in FY2025-26, expanding to the top 1,000 in FY2026-27. While the circular dilutes some of the more stringent regulations, India’s structured approach to sustainability reporting can serve as a reference point for developing economies seeking to unlock ESG finance. Building trust through stable regulations can help derisk investments and reduce the “greenwashing premium,” helping India tap into global sustainable finance more effectively.
