A lack of global standardization for climate-related financial regulation has created a confusing, disconnected and easy to ignore cross-border compliance landscape, according to a new analysis from RegTech provider CUBE.
This patchwork regulatory system is hampering financial services companies from implementing crucial climate change mitigation measures, CUBE’s analysis finds. A global lack of standardization highlights the chasm between what regulators are saying and what they are enacting in the form of rules, regulations and legislation.
Underlying CUBE’s analysis is its proprietary inventory of standardized global regulatory data, including more than 116,000 data points from regulators gathered over the past decade.
Some of the CUBE report’s key findings include:
- Climate-related regulatory issuances surged in 2021, with the analysis finding that of the nearly 102,000 issued since 2017, almost two-thirds came in 2021 alone.
- Just 4 percent of the 50,000-plus climate-related issuances and guidance made in the past 10 years in Europe exist within in-force regulations. That figure is higher in North America (16 percent) but much lower in Asia, where less than a tenth of a percent of issuances have been codified.
“Without a global regulatory standard, a lack of cross-border collaboration has emerged, resulting in meaningful discussion but limited action and guidance from regulators,” CUBE founder and CEO Ben Richmond said in a news release. “This has inadvertently left gray areas around how firms can navigate and implement regulatory change. It has also left gaps in how these firms can effectively curb climate change risks. Ultimately, ESG-related regulation is one of the most important regulatory movements we have seen in our time, so much so that over 2020 and 2021, in the face of a global pandemic, regulatory bodies continued to publish climate-related content in the tens of thousands.”
Exacerbating the problem, in CUBE’s analysis, is silence from some of the world’s most prominent and powerful regulatory authorities. The UK’s Financial Conduct Authority only accounted for 0.004 percent of all regulatory instances within the data analyzed, and the U.S. Securities and Exchange Commission represented even less — 0.0004 percent.
Read the full findings of CUBE’s climate change regulation report here.
