Expert insights: sustainable reporting regulation

At the BNP Paribas Sustainable Future Forum, experts discussed how sustainability disclosure regulation is shaping the ESG landscape.


Sustainability disclosure regulations are maturing rapidly as regulators seek to enhance data quality, comparability and availability. In response, investors, financial institutions and companies are adapting.

At BNP Paribas’ annual Sustainable Future Forum (SFF) experts in London and Paris, expert speakers shared their insights.

New standards come to the fore

The European Union (EU) has a leading role in setting sustainability standards. The Corporate Sustainability Reporting Directive (CSRD) is the law that mandates companies operating in the EU, including non-EU companies, to report on sustainability impact, risks and opportunities, while the European Sustainability Reporting Standards (ESRS) provides the detail on metrics and requirements.

In July 2023, the International Sustainability Standards Board (ISSB) published its inaugural standards for general sustainability and climate reporting. In September 2023, the body indicated that 30 countries have committed to introduce, or consider introducing, the ISSB Standards into jurisdictional requirements. In the UK, the government confirmed that it will make endorsement decisions on its first two standards based on the ISSB guidelines by July 2024.

The key distinction between the approach of the ISSB and the EU centres on materiality. The CSRD requires that companies consider their material impact on society and the environment as well as how they are materially impacted by ESG issues, so called double materiality. While ISSB standards are focused on reporting sustainability issues and opportunities that are financially material to investors.

Speaking at the event, Laurie Fitzjohn-Sykes, Co-Head of ESG Research, BNP Paribas Exane explained: “There is a fundamental difference in the aim between double and single materiality. However, all materiality judgements are subjective and so the test will be how investors and auditors use ISSB to push for improved disclosure.”

Jeanne Aing, Head of CIB Regulatory Anticipation, BNP Paribas added:The EU standards are the most ambitious ones, going beyond climate and recognising the importance of a holistic reporting approach, such as social or biodiversity. Moreover, to enhance trust, ESRS are subject to assurance by an independent third party.

“Despite these main differences, interoperability on climate between ESRS and ISSB is key for both companies and investors to streamline reporting requirements,” she said.

Jeanne Aing

Interoperability on climate between ESRS and ISSB is key for both companies and investors to streamline reporting requirements.

Jeanne Aing
Head of CIB Regulatory Anticipation, BNP Paribas

Global requirements converge on Scope 3

On topics such as Scope 3 reporting, the two approaches reconcile in that under the ISSB Standards,  Scope 3 greenhouse gas emissions are presumed to be material information for investors, and thus required under both EU and ISSB requirements.

Speaking at the event, Richard Barker, Board Member, ISSB noted: “Scope 3 greenhouse gas emissions for us is presumed to be material information, because if you want to understand the economic transition that a business needs to go through in order to operate sustainably, you need to understand its carbon footprint upstream and downstream.”

Richard Barker

If you want to understand the economic transition that a business needs to go through in order to operate sustainably, you need to understand its carbon footprint upstream and downstream.

Richard Barker
Board Member, ISSB

In the US, a regulatory pincer effect is pushing companies in the same direction. The SEC has proposed that companies report Scope 1 and Scope 2 emissions. Also, the California legislature recently passed two climate-related bills that require U.S. companies that do business in California to also disclose their Scope 3 greenhouse gas emissions publicly.

The scope of companies directly impacted by the ESRS requirements is expansive from 2024 fiscal year, including US and other non-EU headquartered companies with operations in the EU.

In the coming years, reporting Scope 3 emissions requirement should cover close to half of the global economy and have knock-on consequences for the other half.  

Investor perspectives

In Paris, speakers engaged in a discussion on how investor demand and regulation are shaping sustainable investing. Marie-Gwenhaelle Geffroy, Global Head of Sustainability and Private Capital Practice, BNP Paribas, presented findings from the BNP Paribas ESG Survey.

“In the investment community, and in a still complex and evolving regulatory environment, the definition of sustainable investing is still being built”, explained Geffroy.

“Where there is a strong regulatory framework, like in Europe, players tend to align with that. Investors are, however, taking action globally, integrating ESG into their operations and building their own definitions of what sustainable investment means, based on their own organisation’s focus. They are also looking more systematically at active engagement, thematic investing and impact.”

In this context, assessing impact and engagement with companies have become key. In London, this change was discussed in relation to the sustainable bonds market.

Franck Rizzoli, Head of ESG Financing Advisory Global Banking, BNP Paribas commented: “When you try to define sustainable investment, it is true the regulation is not always clear. But ultimately what we are seeing more and more from investors is a preference for use of proceed bonds. It is not perfect; the EU Taxonomy will help a little bit. But it has the benefit to clearly identify the impact of the investment.”

The regulatory developments combined with an ever-increasing investor sophistication when it comes to ESG make sustainable bonds, be it use of proceeds or sustainability linked, a cornerstone of the financing strategy of many issuers today.

“Engagement and looking at the entity holistically is really something that is front and centre for investors. As such, sustainable bonds are a unique tool for any issuer, be it corporates, financial institutions, MDBs or sovereigns, to showcase to investors how they are implementing their transition,” explained Agnes Gourc, Head of Sustainable Capital Markets, BNP Paribas.

Agnes Gourc

Sustainable bonds are a unique tool for any issuer to showcase to investors how they are implementing their transition.

Agnes Gourc
Head of Sustainable Capital Markets, BNP Paribas

“Delivering a sustainable bond to the market also means increased engagement internally,” Gourc continued. “For those that have done the exercise of preparing sustainable finance transactions they end up having a much better connectivity between the treasury team and the business teams at large.”

The European Parliament and European Council earlier this month adopted the new EU green bond standards. The regulation on European green bonds could influence the development of global standards for sustainable finance, further aligned with EU climate and environmental goals.

Future standards, and frameworks

In September, the Taskforce for Nature-related Financial Disclosures (TNFD) released its finalised framework for nature disclosures, based on the model established by the TCFD framework. They set out guidance to companies on reporting on nature and biodiversity issues and provide a structure for the development of more detailed standards.

This is a familiar story; the TCFD recommendations have formed the structure underlying ISSB and ESRS Standards and been mandated in a number of countries.

The pathway for TNFD therefore appears clear, but it remains several years behind climate reporting.

Barker concluded: “TNFD have followed the TCFD model, both in the initial design and structure, but also in explicitly being intended to be picked up by standard setters. So, it is not a standard setter. It doesn’t want to be a standard setter. What it’s doing is laying the groundwork that could prove useful if we were to develop a nature standard in the future, which from our point of view is incredibly welcome.”

If you want to stay up to date on sustainable regulations, sign up for our upcoming ESG Regulation webinar on 13 November.

For more expert insights, check out the replay of 2023 BNP Paribas Sustainable Future Forum