Standards

International standards, guidelines, principles and regulations are important drivers of ESG integration. Although most of them are voluntary, investors are taking them into account in their ESG integration activities. These efforts can help them put necessary policies and processes in place, and mitigate regulatory and other risks. 

Based on a review of sustainability integration practices of the world’s largest public pension and sovereign wealth funds, the following principles and standards were the most frequently used. They serve as:

> Overall frameworks to provide guidance for sustainability-oriented investment;

> Benchmarks for the alignment of investment with sustainable development;

> Basic norms or minimum safeguards, the violation of which could lead to exclusion from a portfolio;

> Standards for sustainability reporting; or

> Standards for sustainability-themed financial products, such as green bonds and green buildings.

Global frameworks and principles

United Nations Sustainable Development Goals (SDGs)

The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address global challenges, including those related to poverty, inequality, climate change, environmental degradation, peace and justice. The 17 Goals are all interconnected, and should be achieved by 2030.

United Nations Paris Agreement on Climate Change

The central aim of the Paris Agreement is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. 

United Nations Global Compact

The United Nations Global Compact is both a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices. It seeks to align business operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to catalyze actions in support of broader UN goals.

United Nations Guiding Principles on Business and Human Rights

The Guiding Principles provided the first global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity, and they continue to provide the internationally-accepted framework for enhancing standards and practices with regard to business and human rights.

United Nations International Labour Standards

The International Labour Organization has maintained and developed a system of international labour standards aimed at promoting opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and dignity. 

The G20/OECD Principles of Corporate Governance

The Principles help policy makers evaluate and improve the legal, regulatory, and institutional framework for corporate governance. They also provide guidance for stock exchanges, investors, corporations, and others that have a role in the process of developing good corporate governance. 

OECD Guidelines for Multinational Enterprises

The guidelines are the most comprehensive international standard on responsible business conduct. They cover all key areas of business responsibility, including human rights, labour rights, environment, bribery, consumer interests, as well as information disclosure, science and technology, competition, and taxation. 

Reporting frameworks and standards

Task Force on Climate-related Financial Disclosures (TCFD)

The Financial Stability Board’s TCFD develops voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The work and recommendations of the Task Force help companies understand what financial markets want from disclosure in order to measure and respond to climate change risks, and encourage firms to align their disclosures with investors’ needs.

Carbon Disclosure Project (CDP)

CDP runs the global environmental disclosure system, and supports thousands of companies, cities, states and regions to measure and manage their risks and opportunities on climate change, water security and deforestation.

Global Reporting Initiative (GRI)

GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social well-being. The GRI Sustainability Reporting Standards are the first and most widely adopted global standards for sustainability reporting. 

Sustainability Accounting Standards Board (SASB)

SASB’s mission is to help businesses around the world identify, manage and report on the sustainability topics that matter most to their investors.

Core indicators for entity reporting on contribution towards implementation of the SDGs

The objective of the indicators is to provide practical information on how these indicators could be measured in a consistent manner and in alignment with countries’ needs on monitoring the attainment of the SDG agenda.

Industry standards

EU taxonomy for sustainable activities

European Union’s 2016 Directive on Institutions for Occupational Retirement Provision (IORP II) requires pension funds to assess climate change and social risks in their investment decisions, and the 2018 Financial Instrument Market Directive II (MiFID II) requires investment advisors to take into account the sustainable preferences of their clients. The European Union has also been working on a series of policy instruments on sustainable investment, including the recently adopted EU taxonomy for sustainable activities, which will further drive sustainable investment practices and reporting in the market. 

Climate Bonds Standard

The Climate Bonds Standard and Certification Scheme is a labelling scheme for bonds and loans. Rigorous scientific criteria ensure that bonds and loans with Certification, are consistent with the 2 degrees Celsius warming limit in the Paris Agreement. The Scheme is used globally by bond issuers, governments, investors and the financial markets to prioritise investments which genuinely contribute to addressing climate change.

Green Bond Principles

The Green Bond Principles (GBP) are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond. 

Green Real Estate Sustainability Benchmark (GRESB)

GRESB was established by a group of large pension funds who wanted to have access to comparable and reliable data on the ESG performance of their investments. It has grown to become the leading Environmental, Social and Governance (ESG) benchmark for real estate and infrastructure investments across the world.

    Initiatives

    Sustainable Stock Exchanges Initiative (SSE)

    The SSE initiative is a UN Partnership Programme organised by UNCTAD, the UN Global Compact, UNEP FI and the PRI. The SSE’s mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organizations, can enhance performance on ESG (environmental, social and corporate governance) issues and encourage sustainable investment, including the financing of the UN Sustainable Development Goals.

    Principles for Responsible Investment (PRI)

    The PRI encourages investors to use responsible investment to enhance returns and better manage risks; to understand the investment implications of environmental, social and governance (ESG) factors; and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.