Sustainability: regulatory landscape
Sustainability and climate change have become priority issues on the international regulatory agenda, giving rise to an increasingly broad and sophisticated regulatory ecosystem aimed at providing rigorous, comparable and verifiable information on the risks and opportunities associated with ESG factors. This development has been accompanied by disclosure standards, environmental taxonomies and risk management frameworks, as well as specific supervisory expectations, particularly in the financial sector. More recently, regulatory efforts have focused on technical adjustments aimed at strengthening consistency, proportionality, and overall effectiveness across the framework.
Sustainability: regulatory landscape
Executive summary
The regulatory landscape for sustainability is shaped by two major trends. On the one hand, there are regulations that affect the entire sector, such as climate change laws, disclosure rules, and climate and environmental taxonomies. On the other hand, some initiatives are specific to the financial sector, focusing on risk management and supervisory expectations, regulatory stress tests, and the development of transparency standards. Currently, the regulatory focus is on optimizing and simplifying this regulatory ecosystem, particularly in Europe, to improve its practical application while preserving climate and sustainability ambitions.
Main content
This Technical Note aims to provide an up-to-date overview of the regulatory landscape and international standards that constitute the regulatory framework for sustainability.
In this context, cross-sector regulatory trends can be grouped as follows:
- Climate change laws. Although these laws vary in their specific approaches, they share the common goal of mitigating the effects of climate change and promoting environmental sustainability.
- Taxonomy. A classification system that defines technical selection criteria to enable a common understanding of activities that contribute to ESG goals.
- Transparency. Standards setting qualitative and quantitative information disclosure requirements for companies.
In addition to the above, key trends specific to the financial industry include:
- Risk management and supervisory expectations. Regulatory requirements, guidelines and expectations regarding how entities should integrate ESG risks into their risk management frameworks.
- Regulatory stress testing. Climate stress tests assess banks' resilience to transition risks arising from new policies and technologies, as well as to physical risks resulting from acute and chronic extreme weather events.
- Transparency. Disclosure of prudential information, as prescribed in BCBS Pillar III, and sector-specific voluntary disclosures, such as those related to investment funds and green or social bonds under the Green Bond Principles or Social Bond Principles.
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