WEBVTT - US ESG Backlash Steps Up as EU Strengthens Standards 0:00:00.320 --> 0:00:03.280 This is Dana Perkins and you're listening to Switched on 0:00:03.600 --> 0:00:07.320 the B and EF podcast. The first quarter of twenty 0:00:07.360 --> 0:00:11.400 twenty four has seen a flurry of sustainable finance policy activity, 0:00:11.560 --> 0:00:14.840 with a wave of new mandatory reporting rules and no 0:00:15.040 --> 0:00:18.119 let up an anti ESG sentiment in the United States. 0:00:18.400 --> 0:00:21.479 It's such a rapidly changing environment, so keeping abreast of 0:00:21.560 --> 0:00:24.120 all of the global policy updates can be a tough task. 0:00:24.400 --> 0:00:28.280 But to help, BNF recently released its inaugural Sustainable Finance 0:00:28.320 --> 0:00:31.360 Policy Quarterly Report, and this gives an overview of the 0:00:31.400 --> 0:00:34.840 most significant policy developments in Q one for twenty twenty four. 0:00:35.120 --> 0:00:37.839 This is across G twenty markets and a few other regions. 0:00:37.920 --> 0:00:40.959 And to discuss this report and its findings today, I'm 0:00:41.040 --> 0:00:43.760 joined by the author, Maya Goonomer, who is a Senior 0:00:43.800 --> 0:00:47.800 Associate for the Green and Sustainable Finance Team at BNF. 0:00:47.840 --> 0:00:50.600 We review the climate policy environment since the beginning of 0:00:50.600 --> 0:00:53.599 the year and talk about the introduction of the Corporate 0:00:53.640 --> 0:00:57.120 Sustainability Reporting Directive in the European Union and we go 0:00:57.160 --> 0:01:00.760 through the potential impact of wider reporting standards. We then 0:01:00.840 --> 0:01:03.760 turned to the US and we review the anti ESG 0:01:03.880 --> 0:01:08.360 movement and the ramifications for green and ESG aligned investments. 0:01:08.680 --> 0:01:12.319 B and EF subscribers can find Maya's Sustainable Finance Policy 0:01:12.400 --> 0:01:15.520 quarterly at BNF dot com or at BNF go on 0:01:15.520 --> 0:01:18.360 the Bloomberg terminal. Make sure to subscribe to switched on 0:01:18.360 --> 0:01:21.839 on Apple Podcasts, Spotify or wherever you get your podcasts, 0:01:21.880 --> 0:01:23.600 and if you give us a review on any of those, 0:01:23.640 --> 0:01:25.960 that will help share us with others. But right now, 0:01:26.040 --> 0:01:39.880 let's talk to Maya about sustainable finance policy. Maya, thank 0:01:39.920 --> 0:01:41.559 you for coming on the show again today. 0:01:41.760 --> 0:01:43.440 Hello Dana, thank you for having me. 0:01:43.680 --> 0:01:46.959 We're going to talk about some emerging policies that have 0:01:47.080 --> 0:01:49.520 actually well, well we've seen a wave of policies that 0:01:49.520 --> 0:01:51.840 have really come through fairly recently, and we're going to 0:01:51.840 --> 0:01:54.160 get into this policy discussion as well as a new 0:01:54.240 --> 0:01:56.640 tracker that we've made at BNF which is a US 0:01:56.720 --> 0:02:00.240 anti ESG tracker. But before we get to the ANTIESG parright, 0:02:00.320 --> 0:02:02.960 let's talk about these policies. What would you say have 0:02:03.000 --> 0:02:05.080 been some of the developments or you know, really when 0:02:05.080 --> 0:02:08.280 you're speaking to people who are looking closely at ESG, 0:02:08.639 --> 0:02:12.680 what are some of the frameworks and potentially conflicting parts 0:02:12.680 --> 0:02:15.280 of frameworks that people are discussing at the moment. 0:02:15.800 --> 0:02:19.360 I think we're reaching that point where we have so 0:02:19.440 --> 0:02:23.840 many of them. So what's keeping sustainability professionals up at 0:02:23.919 --> 0:02:28.120 night is trying to basically reconcile everything that they are seeing. 0:02:28.720 --> 0:02:31.800 Most companies and firms are global firms. So one of 0:02:31.840 --> 0:02:33.960 the key developments we've seen in the past quarter is 0:02:34.000 --> 0:02:38.960 the USSEC, the Security and Exchange Commission passing finally its 0:02:39.000 --> 0:02:42.600 climate role or reporting for companies. But that has been passed, 0:02:42.639 --> 0:02:45.839 and then straightaway has been posed because of so many 0:02:46.440 --> 0:02:51.120 legal issues and potential lawsuits to prevent it to see 0:02:51.120 --> 0:02:53.920 the light. And then in the EU there were again 0:02:54.200 --> 0:02:59.440 more policy development targeting companies around disclosure, around integration of 0:02:59.440 --> 0:03:05.119 sustainable matters. They are conflicting reporting standards that are basically 0:03:05.280 --> 0:03:09.680 popping up around the world. The International Sustainability Standards Board 0:03:10.000 --> 0:03:13.560 built a framework called the IFRSs one and S two. 0:03:13.720 --> 0:03:16.040 I'm so sorry, but these are the names. Actually there 0:03:16.080 --> 0:03:18.480 is not a longer name than that, and it's basically 0:03:18.480 --> 0:03:22.160 a sustainability reporting standard that is looking at sustainability risk 0:03:22.160 --> 0:03:25.600 and climate risk. That is a key standard where the 0:03:25.639 --> 0:03:29.480 same way we build the IFRS, accounting we're building that new, 0:03:29.560 --> 0:03:34.079 big global standard, so that after countries are implementing. 0:03:33.520 --> 0:03:35.720 It, but everyone is implementing it a tiny bit that 0:03:36.000 --> 0:03:38.960 like differently than the other, you know, and you add 0:03:39.000 --> 0:03:43.520 all these layers of complexity, and you're like, when I 0:03:43.560 --> 0:03:46.440 took to sustainability professionals, whether they are in a bank 0:03:46.560 --> 0:03:48.360 or they're in a company, they just are. 0:03:48.160 --> 0:03:50.920 Like, where should I start from? Like which one should 0:03:50.920 --> 0:03:54.240 I report against the first? Which one is the most important, 0:03:54.280 --> 0:03:56.600 which one is the most complicated? And I think the 0:03:56.720 --> 0:04:00.680 key ones are, Yeah, these ISSB developments, the us SEC, 0:04:00.840 --> 0:04:03.480 everyone had all their eyes on it. And in the 0:04:03.840 --> 0:04:07.880 you there were two key policies, the Corporate Sustainability Reporting 0:04:07.920 --> 0:04:13.119 Directives CSRD and the CS three D, the Corporate Sustainability 0:04:13.320 --> 0:04:17.320 Due Diligence Directive, which this one is about sustainability, integration 0:04:17.480 --> 0:04:21.479 and really actionable stuff. But then people are basically asking 0:04:21.520 --> 0:04:23.880 us what's the most important and how do they interact 0:04:23.880 --> 0:04:24.520 with one another? 0:04:24.839 --> 0:04:27.279 So for we're thinking about the fact that these are 0:04:27.680 --> 0:04:30.839 mandatory that are coming through more often that is essentially 0:04:30.880 --> 0:04:32.800 calling people's hand when they're thinking, well what do I 0:04:32.839 --> 0:04:35.680 start with? It's the governments are defining what is the 0:04:35.720 --> 0:04:38.520 imperative most immediately. But why do you think that is. 0:04:38.520 --> 0:04:41.800 Is it showing a sign of sophistication within this market 0:04:41.960 --> 0:04:43.839 or is it showing more a sign of what you 0:04:43.880 --> 0:04:46.760 were just actually talking about, which was that there is 0:04:46.839 --> 0:04:50.080 so many different frameworks that someone has to essentially say 0:04:50.120 --> 0:04:52.160 this is what matters and this is what's optional. 0:04:52.400 --> 0:04:55.680 There is sophistication arriving in this market. There is a 0:04:55.760 --> 0:04:58.640 need for standardization. We've talked about it so much, but 0:04:58.800 --> 0:05:00.560 up until now it was like, oh, we're going to 0:05:00.560 --> 0:05:03.240 create a standard and then people can abide with it 0:05:03.400 --> 0:05:06.400 or not, but you need to impose it effectively. We 0:05:06.520 --> 0:05:08.400 used to have so many different for instance, on the 0:05:08.400 --> 0:05:11.120 corporate level, so many different reporting standard I'm going to 0:05:11.240 --> 0:05:14.440 name abbreviation, but it's just to give an idea to people. 0:05:14.520 --> 0:05:16.960 It's like you had the TCFD task for some client 0:05:17.040 --> 0:05:20.599 related financial disclosure, you had CDP, you had gr I, 0:05:20.800 --> 0:05:23.440 you had says by like, so many to choose from, 0:05:23.520 --> 0:05:25.840 and effectively, if no one says okay, that's the one, 0:05:25.880 --> 0:05:28.240 everyone is going to follow, well you just get a 0:05:28.360 --> 0:05:31.239 range of reporting that are all different from one another. 0:05:31.400 --> 0:05:33.320 And then if I'm an investor or a bank and 0:05:33.360 --> 0:05:35.280 I want to make action on the back of this, 0:05:36.000 --> 0:05:37.880 then you need to spend an extra amount of time 0:05:37.920 --> 0:05:40.760 to standardize all these data and compare it to one another. 0:05:41.000 --> 0:05:42.599 And then because at the end of the day, you 0:05:42.640 --> 0:05:44.719 just want to compare one company to another on the 0:05:44.760 --> 0:05:48.320 back of their environmental, social and governance factors and performance. 0:05:48.760 --> 0:05:52.240 But presumably wouldn't these different reporting frameworks being speaking to 0:05:52.360 --> 0:05:54.960 from the company standpoint to different parts of the financial 0:05:55.040 --> 0:05:58.159 services community and designing that reporting in a way that 0:05:58.240 --> 0:06:01.400 is most digestible to different and financial end players which 0:06:01.560 --> 0:06:04.000 do have different strategies and are looking at things differently. 0:06:04.040 --> 0:06:06.040 So what equities are going to need to be able 0:06:06.080 --> 0:06:09.400 to ascertain, you know, what, compare one company to another. 0:06:09.480 --> 0:06:11.679 It's going to be different than what the credit market 0:06:11.680 --> 0:06:14.159 actually needs in order to be able to make those comparisons. 0:06:14.560 --> 0:06:16.599 It could be it could be something like that. I 0:06:16.600 --> 0:06:20.120 think it was more like appealing to different companies depending 0:06:20.200 --> 0:06:23.520 on their type of service or the thing they wanted. 0:06:23.240 --> 0:06:23.839 To report on. 0:06:24.000 --> 0:06:26.880 They would choose TCFD, if they wanted to report on 0:06:27.000 --> 0:06:30.440 their exposure to climate risk, they would choose SISB, or 0:06:31.440 --> 0:06:34.760 to report on their overall sustainability performance, or they would 0:06:34.839 --> 0:06:38.680 use CDP to report on their climate performance. Now what's happening, 0:06:38.760 --> 0:06:42.480 and in particular in you with the Corporate Sustainability Reporting 0:06:42.640 --> 0:06:45.880 Directives ESORD, so they're like, you need to report on everything. 0:06:45.960 --> 0:06:47.920 You need to report on social you need to report 0:06:47.920 --> 0:06:50.560 on governmance, you need to report on the environmental side. 0:06:50.640 --> 0:06:54.000 It's a double materiality framework there there it is the 0:06:54.000 --> 0:06:56.400 big word have been said, which is like looking at 0:06:56.440 --> 0:07:01.479 both how much climate how much social factors are affecting 0:07:01.560 --> 0:07:05.320 the profitability of a company, the profitability in good or bad. 0:07:05.560 --> 0:07:08.120 So that's the financial materiality, but it's also looking at 0:07:08.160 --> 0:07:11.880 how much the company's operation are affecting the environment or 0:07:11.880 --> 0:07:15.880 effecting society. So that's CSRD, but that means more than 0:07:15.920 --> 0:07:19.080 one thousand and two hundred data points. On the other side, 0:07:19.120 --> 0:07:22.840 you have ISSB, which also tried to encompasses all these 0:07:23.400 --> 0:07:27.280 like metrics. So the ISSB framework is looking at both 0:07:27.320 --> 0:07:33.080 sustainability risk. So that's the IRSs one and the IRSs 0:07:33.160 --> 0:07:36.800 two looks at climate risk disclosure and the IRSs two. 0:07:36.920 --> 0:07:38.960 I keep on saying this to client and makes them laugh. 0:07:39.000 --> 0:07:41.320 When I saw it, I thought it was TCFD, Like 0:07:41.400 --> 0:07:43.720 I was just like, can't be that everyone is talking 0:07:43.760 --> 0:07:45.880 about this thing, and I just don't understand, like it 0:07:45.880 --> 0:07:48.239 seems like it's like, you know, like when you feel 0:07:48.240 --> 0:07:50.880 like a groundhout day, Like you know, it's like I've 0:07:50.960 --> 0:07:54.320 seen this before and it's effectively TCFD, But then looking 0:07:54.360 --> 0:07:57.480 at climate and looking at sustainability matters. 0:07:57.200 --> 0:07:58.640 It was an evolution of it. 0:07:58.640 --> 0:08:01.840 It's an evolution of it. It's building on this framework 0:08:01.880 --> 0:08:05.000 that has been like widely use. A lot of work 0:08:05.000 --> 0:08:07.840 has been done by the TCFD team to promote the 0:08:08.000 --> 0:08:11.239 use of that framework across the globe. And actually TCFD 0:08:11.360 --> 0:08:15.600 retired because it's incorporated in ISSB now, so it doesn't 0:08:15.640 --> 0:08:19.960 exist anymore. But the only difference is that, however, ISSB 0:08:20.120 --> 0:08:23.560 is like free form. It's not structured, it doesn't have 0:08:23.680 --> 0:08:25.560 key metrics you need to report on. 0:08:25.920 --> 0:08:29.000 So in many respects, the voluntary frameworks existed as a 0:08:29.000 --> 0:08:30.640 form of carrot. You got to pick the one that 0:08:30.680 --> 0:08:33.280 was best for you, and it was a really more 0:08:33.320 --> 0:08:35.680 positive way of going about the reporting. And that now 0:08:35.720 --> 0:08:38.040 these mandatory frameworks are a little bit more of a stick, 0:08:38.200 --> 0:08:40.360 so you're going to have to comply. And what you're 0:08:40.400 --> 0:08:42.800 pointing out is that in some cases they're actually an evolution. 0:08:42.880 --> 0:08:46.360 They built on these voluntary frameworks to then create these 0:08:46.360 --> 0:08:49.520 mandatory frameworks. But we haven't necessarily retired all of the 0:08:49.559 --> 0:08:53.400 voluntary frameworks in order to create space for the mandatory ones. 0:08:53.440 --> 0:08:55.120 And that may be something that we do end up 0:08:55.120 --> 0:08:57.360 seeing over time. The future will let us know whether 0:08:57.440 --> 0:08:59.320 or not that ends up being the case. But let's 0:08:59.360 --> 0:09:02.720 go back to this conversation around the CSRD and the ISSB, 0:09:03.440 --> 0:09:06.680 one being mandatory and one being voluntary. Yeah, where is 0:09:06.720 --> 0:09:09.240 the friction between the two and why is their friction? 0:09:09.559 --> 0:09:12.480 Why would you choose one over the other. Well, I 0:09:12.480 --> 0:09:15.160 guess you're not choosing the CSRD. The CSRD is an 0:09:15.160 --> 0:09:16.760 imperative in certain parts of the world. 0:09:17.040 --> 0:09:19.440 Yeah, So, I think one thing that is really important 0:09:19.480 --> 0:09:23.000 to understand between at this shift between voluntary and mandatory 0:09:23.240 --> 0:09:26.400 is also the state of the market. The more advanced 0:09:26.440 --> 0:09:28.920 to get into that sustainable finance market, the more you 0:09:28.960 --> 0:09:31.360 want to force your banks, your investors, your insurance to 0:09:31.440 --> 0:09:34.920 take into account sustainability risk and climate risk in the 0:09:35.160 --> 0:09:38.280 investment processes and the decision making processes, the more you'll 0:09:38.280 --> 0:09:40.679 have to make it mondatory because they'll need the data 0:09:40.760 --> 0:09:43.080 to do this. You can force a climate risk stress 0:09:43.080 --> 0:09:45.040 test onto a bank and say, you know what, you 0:09:45.120 --> 0:09:47.080 figure out with the data you've got, we're not going 0:09:47.120 --> 0:09:50.360 to mandate reporting from companies, So that that's the ground. 0:09:50.400 --> 0:09:53.679 And then for ISSB versus CSRD. So ISSB is a 0:09:53.760 --> 0:09:57.880 voluntary framework, just because the IFRS foundation the same way 0:09:58.000 --> 0:10:00.640 for those of you who have studied a accounting just 0:10:00.720 --> 0:10:03.880 like me, as just an accounting standard, and then countries 0:10:03.920 --> 0:10:07.440 can choose to opt on it or not. So DA 0:10:07.520 --> 0:10:09.240 first was like, okay, we're going to build that standard, 0:10:09.400 --> 0:10:13.040 and then after every single jurisdiction will adopt it or not. 0:10:13.280 --> 0:10:17.080 So certain jurisdiction are making iss be a reporting mondatory. 0:10:17.200 --> 0:10:20.120 So that's the case of Turkey, that's the case of 0:10:20.160 --> 0:10:22.640 BRAZILA is thinking about it, that's the case of the UK. 0:10:23.160 --> 0:10:26.680 Like there are tons of jurisdiction across the globe that 0:10:26.720 --> 0:10:29.680 are making it mandatory. Progressively, some of them are starting 0:10:29.679 --> 0:10:31.760 and being like okay, to start with, we're going to 0:10:31.800 --> 0:10:35.120 make it voluntary, and then it's going to become mandatory eventually. 0:10:35.320 --> 0:10:37.960 The friction comes from the fact that okay, we have 0:10:38.040 --> 0:10:41.160 all these different jurisdiction adopting it, tweaking it a tiny 0:10:41.160 --> 0:10:43.760 bit so that it meets their local requirement. And then 0:10:43.800 --> 0:10:48.240 you have this mammoth of CSRD, which is an EU 0:10:48.360 --> 0:10:54.320 legislation that is affecting fifty thousand companies globally EU and 0:10:54.480 --> 0:10:59.600 non EU company public and private company SMEs because the 0:10:59.640 --> 0:11:02.160 EU has said, okay, we're going to build this new 0:11:02.360 --> 0:11:06.480 reporting standard, and basically any company that is domiciled in 0:11:06.480 --> 0:11:08.920 the EU but also trades in the EU, that has 0:11:08.920 --> 0:11:11.120 a certain amount of revenue in the EU, that is 0:11:11.200 --> 0:11:13.840 listed in the U, all these companies are falling in 0:11:13.880 --> 0:11:16.240 scope first years or if you're doing business in the EU, 0:11:16.480 --> 0:11:19.760 you're most likely going to be in Yeah, exactly. So 0:11:20.120 --> 0:11:24.920 it's phased in the implementation from now like the first 0:11:24.920 --> 0:11:28.079 reporting or starting next year publication of reporting, but it's 0:11:28.080 --> 0:11:30.959 starting this year, but publication next year up until twenty 0:11:31.000 --> 0:11:34.400 twenty nine. There's going to be time. There are these 0:11:34.520 --> 0:11:37.240 like that thousand of metrics, but for each metric you 0:11:37.280 --> 0:11:39.040 have the right to say, actually that metric is not 0:11:39.120 --> 0:11:41.520 material to my business, I'm not going to report on it. 0:11:41.600 --> 0:11:44.600 So there is that flexibility around that. But it's still 0:11:44.640 --> 0:11:48.199 a bloody mammoth, like it's massive. Some companies I'm talking 0:11:48.200 --> 0:11:50.480 to their like we have to capture data we've never 0:11:50.559 --> 0:11:51.320 captured before. 0:11:51.559 --> 0:11:53.240 I mean, how many people have they had to put 0:11:53.280 --> 0:11:56.040 on to these projects that they had to add We're 0:11:56.080 --> 0:11:59.240 taking double digit people to actually work on this reporting 0:11:59.480 --> 0:12:00.840 or is it single digits? 0:12:01.160 --> 0:12:04.080 It really depends on companies, but I think, yeah, I 0:12:04.080 --> 0:12:07.640 think there are all building teams to do that. And 0:12:08.000 --> 0:12:10.360 when I took to companies, some of them are like, 0:12:10.440 --> 0:12:12.280 you know what, I fall in scope for iss B 0:12:12.400 --> 0:12:15.800 reporting n CSRD. CSRD is so stringent that I'm just 0:12:15.840 --> 0:12:18.960 going to do CSRD and then de facto I'm going 0:12:19.040 --> 0:12:20.440 to do my iss BE reporting. 0:12:20.760 --> 0:12:22.960 Do you lose anything by just doing CSRD. 0:12:23.320 --> 0:12:26.200 I don't think so. It's so complicated and thorough that 0:12:26.679 --> 0:12:30.720 you don't. And actually, last week the two authors of 0:12:30.840 --> 0:12:34.160 CSRD and ISSB and I'm not going to go into 0:12:34.200 --> 0:12:37.320 the abbreviation again, but there are two author groups, some 0:12:37.520 --> 0:12:40.360 that built CSRD and some that build ISSB. I've published 0:12:40.360 --> 0:12:45.680 what we call an interoperability guidance, which basically allows company 0:12:45.800 --> 0:12:48.520 to efficiently do the two at the same time and 0:12:48.559 --> 0:12:51.440 be like, these are all the areas where the two 0:12:51.440 --> 0:12:55.360 frameworks collide and where you can gain some time by 0:12:55.480 --> 0:12:57.120 doing one and the other at the same time. 0:12:57.520 --> 0:12:59.800 One of the things that's really interesting about the is 0:13:00.080 --> 0:13:04.800 this is it is truly global. It is not just 0:13:04.880 --> 0:13:08.400 European or just North American. You're finding it in Brazil, 0:13:08.600 --> 0:13:12.600 Costa Rica, Singapore, Turkey, and then recent markets that have 0:13:12.640 --> 0:13:15.400 announced that they will be reporting you in using the 0:13:15.400 --> 0:13:18.960 ISSB framework Pakistan, Kenya. I mean, this is a truly 0:13:19.280 --> 0:13:23.880 diverse set of countries representing different continents. Do you think 0:13:23.920 --> 0:13:27.080 that those outside of Europe will continue to say, well, 0:13:27.160 --> 0:13:29.400 not all of the business of all of the companies 0:13:29.400 --> 0:13:32.400 that we are actually working with need to embrace the 0:13:32.440 --> 0:13:35.760 CSRD because that's not necessarily where their business is. And 0:13:35.800 --> 0:13:39.000 the ISSB will continue to remain dominant in other parts 0:13:39.040 --> 0:13:39.600 of the world. 0:13:39.880 --> 0:13:43.280 For many reasons. ISSB is an easylyft. It's much easier 0:13:43.559 --> 0:13:46.920 when like from a diplomatic standpoint and a political standpoint, 0:13:46.960 --> 0:13:51.160 when you're like a government leader to impose ISSB than 0:13:51.200 --> 0:13:54.160 to impose something like CSRD. CSRD has been in the 0:13:54.200 --> 0:13:56.400 work for a very long time, but ISSB is like 0:13:56.480 --> 0:13:59.839 you know, free for much more qualitative. It leaves much 0:13:59.840 --> 0:14:03.840 more or room for interpretation. You don't have like exact 0:14:03.920 --> 0:14:06.040 metric you need to report on it. It's not like, oh, 0:14:06.080 --> 0:14:08.400 you're a cement manufacturer, you need to report the amount 0:14:08.480 --> 0:14:11.240 of Scope one, two and three emissions that you emit, 0:14:11.640 --> 0:14:15.000 while CSADY has CO three emission. And so depending on 0:14:15.120 --> 0:14:18.280 which stage you are at the development of the sustainable 0:14:18.280 --> 0:14:20.920 findance market, how much the rest of the institutions within 0:14:20.960 --> 0:14:25.920 the country want to integrate sustainability within their own requirements, 0:14:25.960 --> 0:14:29.320 you know, like the financial regulators and whatnot, then they 0:14:29.400 --> 0:14:33.320 probably will be more inclined to mandate ISSB reporting. Also, 0:14:33.320 --> 0:14:36.200 if they have never mandated anything before, they are very 0:14:36.240 --> 0:14:40.200 likely to be undating ISSB. Also, as I said, ISSB 0:14:40.400 --> 0:14:44.000 draws a lot of inspiration from TCFD, and TCFD has 0:14:44.000 --> 0:14:46.760 been very popular, so it's easy to say, you know what, 0:14:46.800 --> 0:14:49.720 you've been doing TCFD for such a long time, move 0:14:49.760 --> 0:14:52.440 on to ISSB. There are some tweaks here and there. 0:14:52.520 --> 0:14:54.520 They are a bit different. You need to first do 0:14:54.560 --> 0:14:56.880 climate risk reporting and then you need to do that 0:14:56.920 --> 0:15:01.160 sustainability reporting. So just expand to other areas. I think 0:15:01.200 --> 0:15:04.520 that's what we're going to see. But what we might 0:15:04.600 --> 0:15:09.000 see is companies themselves saying I'm going to report voluntarily 0:15:09.040 --> 0:15:12.160 against CSRD. So there was like a survey published last 0:15:12.200 --> 0:15:16.239 week on Bloomberg that says seventy percent of the companies 0:15:16.280 --> 0:15:18.560 that we're not in school for CSRD, but answered that 0:15:18.600 --> 0:15:22.600 survey we're planning to at least partially report against CSRD. 0:15:23.040 --> 0:15:26.760 Seventy percent. That's massive, and that's across the globe. 0:15:27.000 --> 0:15:30.400 So I may have oversimplified the ISSB is voluntary versus 0:15:30.480 --> 0:15:33.760 the CSRD is mandatory, because we know the CSRD is 0:15:33.760 --> 0:15:36.360 being implemented in the U and pretty much any company 0:15:36.360 --> 0:15:39.080 that's touching the EUS The way we're framing it with 0:15:39.240 --> 0:15:44.080 ISSB as it being voluntary in theory when countries adopt 0:15:44.120 --> 0:15:46.560 it and say that they're going to phase it in, 0:15:46.680 --> 0:15:48.560 and there actually have been a number of countries that 0:15:48.600 --> 0:15:51.240 have actually announced it that they will be implementing it 0:15:51.280 --> 0:15:54.000 in the future. I think across thirteen markets that are 0:15:54.000 --> 0:15:57.880 in the process of implementing this, it's no longer voluntary 0:15:58.160 --> 0:16:01.880 in those specific countries. So can you kind of clarify 0:16:02.200 --> 0:16:06.080 what voluntary even really means if ultimately the destiny for 0:16:06.240 --> 0:16:09.120 some of these reporting frameworks like the ISSB is getting 0:16:09.160 --> 0:16:12.840 adopted and becoming mandatory in certain jurisdictions. 0:16:13.240 --> 0:16:16.080 Yeah, CSRD has been built straight away to be a 0:16:16.120 --> 0:16:19.640 mandatory framework and being implemented is been built, so there 0:16:19.680 --> 0:16:22.680 is a standard behind it that's been built to be 0:16:22.800 --> 0:16:27.280 the reporting framework that is mundated by the EU ISSB. 0:16:27.400 --> 0:16:30.240 At the beginning, it's a bit like how TCFD worked 0:16:30.280 --> 0:16:32.720 back in the day, Like it's that framework that has 0:16:32.760 --> 0:16:36.480 been built by a third party association, the IFRS foundation. 0:16:36.880 --> 0:16:40.080 That was like, we're building the standard. Whoever wants to 0:16:40.200 --> 0:16:43.840 use it uses it. And when I say whoever, countries 0:16:44.080 --> 0:16:44.760 who wants to. 0:16:44.800 --> 0:16:46.520 Use it, say, we've done the work for you. 0:16:46.560 --> 0:16:49.160 We've done the work for you. The standard has been built. 0:16:49.280 --> 0:16:53.280 Instead of all of you creating your own standard because 0:16:53.280 --> 0:16:56.680 we know you're going to be willing to mundate sustainability reporting, 0:16:56.960 --> 0:17:01.000 instead of choosing a different standard to mum d that reporting, 0:17:01.120 --> 0:17:03.320 we're going to build one standard and then after you're 0:17:03.320 --> 0:17:06.960 going to build laws in your own jurisdiction that moundate 0:17:07.080 --> 0:17:10.760 reporting against the same standard, which is ISSB. So the 0:17:10.800 --> 0:17:13.280 same way back in the day, we had countries saying 0:17:13.520 --> 0:17:17.760 TCFD exists, we ask you to report against TCFD. That's 0:17:17.760 --> 0:17:19.719 the law. The law is to say you need to report, 0:17:19.800 --> 0:17:22.480 and the standard you need to choose to report is TCFD. 0:17:22.680 --> 0:17:24.080 This is what is happening right now. 0:17:24.160 --> 0:17:26.639 So it just has to do with the organization that 0:17:26.760 --> 0:17:29.359 created it, having a lack of authority over countries, but 0:17:29.440 --> 0:17:32.480 ultimately wanting it to become exactory in a number of ocations. 0:17:32.720 --> 0:17:35.240 And then that foundation that was built to develop the 0:17:35.320 --> 0:17:39.040 ISSB was endorsed by many different countries, including the EU, 0:17:39.320 --> 0:17:42.479 saying okay, we need a global standard so that instead 0:17:42.480 --> 0:17:45.680 of going all in our little corner and asking companies 0:17:45.720 --> 0:17:47.639 to do a reporting that is a tiny bit different 0:17:47.680 --> 0:17:50.159 from one another or completely different, then we're going to 0:17:50.240 --> 0:17:52.119 have a standard we can all abide with. On the 0:17:52.160 --> 0:17:55.119 other side, the CSRD relies on its own standard that 0:17:55.160 --> 0:17:58.720 has been built by the EU themselves. It's called the 0:17:58.800 --> 0:18:03.840 European Sustainability Reporting Standard. So effectively, when I took about CSRDVERSSSB, 0:18:03.920 --> 0:18:09.280 it's effectively the European Sustainability Reporting Standard ESRs against ISSB. 0:18:09.400 --> 0:18:11.800 These are the two different reporting standard. One is going 0:18:11.840 --> 0:18:13.840 to tell you need to build that table. The other 0:18:13.880 --> 0:18:16.199 one will tell you you need to be that other table. 0:18:16.400 --> 0:18:19.560 That's what is different. So then in itself ISSB does 0:18:19.600 --> 0:18:23.360 not mandate anything to anyone, but then it's being endorsed 0:18:23.400 --> 0:18:27.679 by government and put into law in different jurisdictions. 0:18:26.960 --> 0:18:29.919 Well, and among this list of governments that have adopted this, 0:18:30.119 --> 0:18:32.640 there seem to be a number of emerging markets who 0:18:32.640 --> 0:18:34.680 have actually signed up for it. And do you think 0:18:34.680 --> 0:18:38.040 there's any particular reason that it has been popular in 0:18:38.200 --> 0:18:39.160 emerging markets. 0:18:39.440 --> 0:18:43.639 I think it's because the ISSB standard is an easy 0:18:43.640 --> 0:18:46.439 lift when you're at the beginning, in the early stage 0:18:46.440 --> 0:18:50.320 of developing a sustainable finance market. It means that if 0:18:50.359 --> 0:18:54.399 you want companies to start assessing their exposure to sustainability 0:18:54.400 --> 0:18:57.720 and climate risk, the ISSB is not that difficult to 0:18:58.080 --> 0:19:02.160 get a political approval on because it's just single materiality, 0:19:02.240 --> 0:19:05.280 so it's just looking at the financial impact of sustainability 0:19:05.320 --> 0:19:08.720 matters compared to the CSRD that I explained earlier, So 0:19:08.960 --> 0:19:11.480 that makes it easier. And it's also an easy lift 0:19:11.560 --> 0:19:14.920 because it's very much like as I said, it's super 0:19:14.920 --> 0:19:17.359 similar to TCFD, so you had already a lot of 0:19:17.400 --> 0:19:21.119 companies that had endorsed that framework, and it's just like 0:19:21.240 --> 0:19:24.080 expending a tiny bit the perimeter of TCFD. So that 0:19:24.160 --> 0:19:27.080 might be the reason why. The main thing we might see, however, 0:19:27.440 --> 0:19:31.520 is that with CSRD ISSB, all these different like reporting 0:19:31.560 --> 0:19:34.520 framework popping up is that what I hear from companies 0:19:34.560 --> 0:19:37.280 is companies are saying, we're happy to do all these exercise. 0:19:37.359 --> 0:19:39.159 We know we have to report on new stuff, on 0:19:39.240 --> 0:19:42.720 new factors. We're happy to devote the teams to do that, 0:19:42.960 --> 0:19:46.240 to put the means towards building this. We think it's 0:19:46.280 --> 0:19:50.240 actually representing our business a bit better. However, if investors 0:19:50.560 --> 0:19:53.720 that have like a good sustainability performance, I'm talking on 0:19:53.800 --> 0:19:56.280 the companies that are training, like, look, we're actually making 0:19:56.320 --> 0:19:58.680 an effort. What they're telling us is that if this 0:19:58.840 --> 0:20:01.960 doesn't lead in investors to invest more in us to 0:20:02.119 --> 0:20:05.160 decrease our cost eff equity, to decrease our cost of debt, Basically, 0:20:05.200 --> 0:20:08.520 that like not reward us on the back of the 0:20:08.640 --> 0:20:10.919 all these efforts that we do just going to end 0:20:11.000 --> 0:20:14.080 up doing it as a compliance stickboxing exercise. 0:20:14.040 --> 0:20:15.800 And it's not going to drive the same level of 0:20:15.880 --> 0:20:18.879 change that it potentially exactly, which then leads us. So 0:20:18.880 --> 0:20:20.359 I want to make sure that we have enough time 0:20:20.440 --> 0:20:23.320 to talk about this new tracker that we've made focused 0:20:23.359 --> 0:20:28.119 on anti ESG legislation, specifically in the US, which is 0:20:28.160 --> 0:20:29.719 the other side of it. So as we end up 0:20:29.720 --> 0:20:34.280 seeing more legislation mandating reporting and trying to you know, 0:20:34.320 --> 0:20:36.600 really rally people around, coming up with a common set 0:20:36.640 --> 0:20:40.240 of metrics and the ability to make decisions based on 0:20:40.320 --> 0:20:43.560 better quality data. When it comes to sustainability, there's been 0:20:43.680 --> 0:20:46.680 this movement, if you will, across a number of US 0:20:46.680 --> 0:20:49.680 states that have essentially said that, well, maybe that reward 0:20:50.000 --> 0:20:53.240 in terms of performance doesn't necessarily exist and it could 0:20:53.240 --> 0:20:57.240 be at conflict with fudiciary duty. Therefore ESG is not 0:20:57.320 --> 0:20:59.560 allowed in our state. And even if you're not on 0:20:59.680 --> 0:21:02.359 Walls Street in New York and the amount of money 0:21:02.400 --> 0:21:05.480