INTERNATIONAL STANDARDS AND REGULATIONS SHAPING ESG INTEGRATION
Estimated reading time: 6 min.
In the rapidly evolving investment landscape, ESG (Environmental, Social, and Governance) considerations are no longer optional — they are integral to portfolio management. Regulatory frameworks and international commitments are reshaping how ESG funds are structured, monitored, and evaluated.
In this article, we explore the key regulations that guide ESG strategies and why they matter for long-term, sustainable value creation. You’ll find links to essential reference documents so you can explore the original sources in detail.
KEY FRAMEWORKS AND REGULATORY INITIATIVES DRIVING ESG INVESTMENT
Sustainable norms and initiatives are the backbone of ESG integration. Moreover, regulations provide clear standards, promote transparency, and ensure that sustainable investment is not just a marketing label but a measurable, accountable commitment.
Initiatives shaping ESG today:
The 17 sustainable development goals – A global blueprint adopted by all United Nations Member States to address pressing social, economic, and environmental challenges.
The ten principles of the UN global compact – A voluntary initiative encouraging businesses and investors to align strategies with principles on human rights, labor, environment, and anti-corruption.
Report of the high-level expert group on sustainable finance – A foundational document for the EU’s sustainable finance strategy, addressing how capital markets can better support sustainability.
Principles for responsible investment – A set of six principles offering guidance for incorporating ESG factors into investment decisions.
Sustainability Accounting Standards Board (SASB) – Standards designed to help businesses disclose financially material sustainability information to investors.
2021–2022: A TURNING POINT FOR ESG REGULATION
European institutions responded to the climate emergency by turning the ambitions of the 2015 Paris Agreement into concrete regulations and directives. This regulatory momentum gained speed in 2021 and 2022, when several landmark ESG frameworks came into force. Together, they established stronger obligations for investors and asset owners, reinforcing the integration of sustainability into financial decision-making across Europe:
Disclosure Regulation (EU 2019/2088) – Sustainable Finance Disclosure Regulation (SFDR), setting transparency requirements on how sustainability risks are integrated.
Low Carbon Benchmark Regulation (EU 2019/2089) – Establishes EU Climate Transition Benchmarks and Paris-aligned Benchmarks.
Taxonomy Regulation (EU 2020/852) – Defines sustainable economic activities and provides reporting obligations.
In addition to these pan-European frameworks, sector-specific and national regulations are also integrating ESG considerations, including:
TURNING REGULATION INTO COMPETITIVE ADVANTAGE
Regulations are accelerating the integration of ESG into investment decision-making, ensuring that ESG funds deliver both financial returns and measurable positive impact. For asset owners, understanding and applying these frameworks is essential to meeting stakeholder expectations and navigating an increasingly complex regulatory environment.
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