The rapid growth of ESG regulations

The world is taking strides to address climate change, with legislation reflecting the urgency of the global environmental crisis. New research has revealed the rapid increase in Environmental, Social, and Governance (ESG) regulations, illustrating intensified commitment to sustainability across the globe. The study by sustainability data and technology firm, ESG Book, revealed a staggering 155% increase in global ESG regulations over the last decade. However, there is an emerging concern about companies’ ability to successfully navigate the ever-growing labyrinth of reporting requirements.

Drawing from the extensive database of the World Business Council for Sustainable Development’s (WBCSD) Reporting Exchange platform, ESG Book’s analysis provides a comprehensive overview of over 2,400 ESG regulations spanning more than 80 jurisdictions worldwide. These regulations are all updated in real-time, mirroring the global urgency of addressing environmental concerns.

The deep-dive analysis exposed that there has been a dramatic rise in ESG regulations since 2011, with a total of 1,255 new regulations introduced around the globe – an impressive 155% increase compared to the preceding decade. To put it into perspective, there were only 493 regulations implemented between 2001 and 2010. This trajectory showcases a remarkable 647% surge in ESG regulations since the start of the new millennium.

Most of these emerging regulations are striving to harmonise with prevailing industry standards that companies are currently adhering to. These include the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Task Force on Climate-Related Financial Disclosures (TCFD), and Sustainable Finance Disclosure Regulation (SFDR).

Dr Daniel Klier, Chief Executive of ESG Book, commented on the significance of the research; “ESG regulation is today a hot topic, sparking debate across financial markets. On one hand, proponents argue that it is a vital step towards creating a more sustainable and resilient world, where businesses are held accountable for their environmental impact, social responsibilities, and governance practices. On the other hand, some critics argue that ESG regulation burdens companies with excessive compliance, and can hinder economic growth.”

Dr Klier emphasised that the steep rise in ESG regulation will persist as markets increasingly demand effective and transparent allocation of capital towards sustainable objectives. 

In this era of burgeoning environmental consciousness, ESG regulations are predicted to keep expanding. Asset managers, therefore, face the pressing task of staying abreast of this changing landscape, understanding the compliance intricacies, and assessing the associated risks of their investment portfolios.

Here, solutions such as SI Engage become invaluable. As a leading sustainable investment service, SI Engage equips asset managers with vital tools and strategies to navigate the complexity of the ever-evolving ESG regulations. Beyond compliance, SI Engage’s robust platform aids in identifying and mitigating potential ESG-related risks, ensuring that investments are not only compliant but resilient in the face of shifting global standards.

In this way, SI Engage doesn’t merely help asset managers meet the rising demands of ESG regulations, but also enables them to play a proactive role in steering their investments towards a more sustainable future. In the midst of a rapidly changing regulatory environment, SI Engage stands as a crucial ally for asset managers aiming for sustainable, compliant, and risk-mitigated investment outcomes. Get in touch today to book your demo!

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