The ESG Reporting Cheat Sheet

ESG
50 must-know terms for modern companies

1 2 3 4 5 6 7 8 9

Southeast
Asia
edition

What’s inside?
Climate change is a hot global topic. Across industries and around the world, the
finance sector will be instrumental in shaping a more sustainable future. In this guide,
we outline 50 must-know environmental, social, and governance (ESG) terms—
explaining what they mean and why they matter in the world of modern corporate
reporting. Read on to learn the ABCs of ESG.
The ESG ecosystem
Intergovernmental organizations Governments (lawmakers)
1
2
United Nations European Union
3

Standards setters Research organizations Regulators and supervisors

4

Industry
ESG ratings, benchmarks, and indices 5 Industry initiatives and associations

6
10
Stock exchanges Investment managers 9 Listed companies
7 8 11

Participants Civil society Employees Customers Retail investors

12
12
 The ESG ecosystem

The ESG ecosystem is made up of many When ESG laws are passed [3], regulators These ratings and scores are used to create
different moving parts, from lawmakers and supervisors enforce corresponding ESG indexes in collaboration with stock
to standards setters to regulators and reporting mandates [4]. exchanges. Investment managers also
beyond. This diagram shows how all obtain information from these suppliers [5].
these components combine to form one Listed companies report to their owners,
cohesive environment. investment managers (institutional Stock exchanges can also implement
shareholders) [9], and retail shareholders listing requirements. Research
In brown and orange, we see the finance [11], as well as to employees, customers, organizations and standard setters supply
sector itself at the heart of the action. and civil society through multi-stakeholder the science and standards for reporting
reporting [11]. Listed companies, comparable ESG metrics.
The blue-grey boxes at the bottom of the investment managers, and other main
diagram represent all the parties pushing for players in the sector report to regulators
change: participants in investment funds and supervisors [6].
[12] and the multi-stakeholder audience
of listed companies, which includes retail Investment managers could be banks,
shareholders, employees, customers, and pension funds, insurance companies, or
civil society [17]. listed investment management entities that
offer investment products and funds [8]. If
Standard setters, research organizations, a fund is not listed, there are participants to
and intergovernmental organizations whom ESG information is reported [7].
like the United Nations are accelerating
the shift toward a sustainable future by Companies also provide information to
influencing governments [1] and the suppliers of ESG ratings and benchmarks
finance sector [2] at large. [10], and receive a rating or score in return.
Contents
United Nations ESG ratings, benchmarks, Standards & standards setters
and indices
UN Global Compact (UNGC)  6 CDP  10 Global Reporting Initiative (GRI) 17
The Ten Principles  6 Morgan Stanley Capital 10 Global Sustainability Standards 17
Sustainable Development Goals 7 International (MSCI) ESG Ratings Board (GSSB) 
(SDGs)  Morningstar Sustainalytics  11 Global Reporting Initiative 17
UN Environment Programme 7 S&P Sustainability & Climate Indices 11 (GRI) Standards 
Finance Initiative (UNEP FI)  FTSE4Good Index Series  11 IFRS Foundation 17
ISS ESG Indices  12 Integrated Thinking Principles 18
Industry Global Real Estate Sustainability 12 Integrated Reporting Framework 18
World Economic Forum (WEF) 8 Benchmark (GRESB)  SASB Standards 18
Financial Stability Board (FSB)  8 International Sustainability Standards  18
TCFD8 Southeast Asia 13 Board (ISSB)
Principles for Responsible 9 Singapore 15 IFRS Sustainability Disclosure 18
Investment (PRI)  Malaysia 15 Standards
Chartered Financial Analyst (CFA) 9 Hong Kong 15 IFRS Sustainability Disclosure 19
Institute  Taiwan 16 Taxonomy
World Business Council for 9 International Public Sector Accounting 19
Sustainable Development (WBCSD) Standards Board (IPSASB) 
European Union Regulators and supervisors Key ESG concepts

European Securities and 21 International Organization of 23 Financial materiality  25

Markets Authority (ESMA)  Securities Commissions (IOSCO) Double materiality  25
European Single Electronic 21 Network for Greening the Financial 23 Long-term value creation  25
Format (ESEF)  System (NGFS)  Greenhouse Gasses (GHGs)  25
Non-Financial Reporting Directive 21 Carbon dioxide equivalent (CO2e) 25
(NFRD)  Research organizations Upstream and downstream emissions 25
Corporate Sustainability Reporting 21 Scope 1, 2, and 3 emissions  26
Directive
 (CSRD)  World Resources Institute (WRI) 24 Net zero 26
EFRAG 21 Greenhouse Gas (GHG) Protocol 24
EFRAG Sustainability Reporting Board 21 Science Based Targets Initiative 24
European Sustainability Reporting 21 (SBTi)
Standards (ESRS)
Sustainability Reporting XBRL 22
Taxonomies
Sustainable Finance Disclosure 22
Regulation (SFDR) 
EU taxonomy  22
United Nations 6

As the world’s largest inter­ UN Global Compact (UNGC)

governmental organization,
Launched in 2000, the UNCG is a
the UN supports many ESG non-binding United Nations pact that
initiatives in an attempt to encourages businesses everywhere
to adopt sustainable and socially
shape a more sustainable
responsible policies—and to report on their
future. implementation.
https://www.unglobalcompact.org/

PRI founding member

SBTi collaborator

The Ten Principles

The UNGC framework presents ten
foundational principles in the areas of
human rights, labor, the environment, and
anti-corruption—from “supporting and
respecting the protection of internationally
proclaimed human rights” to “working
against corruption in all its forms, including
extortion and bribery.”
 United Nations 7

Sustainable Development UN Environment Programme

Goals (SDGs) Finance Initiative (UNEP FI)
In 2015, all United Nations member states Created in 1992, UNEP FI is a global
adopted the 2030 Agenda for Sustainable partnership between the United Nations
Development, which provides “a shared Environment Programme (UNEP) and the
blueprint for peace and prosperity for financial sector. UNEP FI works with 450+
people and the planet, now and into the banks, insurers, and investors as well as
future.” Outlined in this agenda are 17 100+ supporting institutions to help shape
SDGs: no poverty; zero hunger; good a financial sector that “serves people and
health and well-being; quality education; planet while delivering positive impacts.”
gender equality; clean water and sanitation;
https://www.unepfi.org/
affordable and clean energy; decent work
and economic growth; industry, innovation, PRI founding member
and infrastructure; reduced inequalities;
sustainable cities and communities;
responsible consumption and production;
climate action; life below water; life on
land; peace, justice, and institutions; and
partnerships for the goals.

https://sdgs.un.org/
Industry 8

By working with modern Financial Stability Board (FSB)

businesses and investors,
Founded in 2009, the FSB is an
these organizations have international body that monitors and makes
played a part in making ESG a recommendations about the global financial
system. Recent work by the FSB has
top priority for companies.
examined “how climate risks might impact,
or be amplified by, the financial system.”
World Economic Forum (WEF)
https://www.fsb.org/
Since its creation in 1971, the WEF has
been committed to improving the state TCFD
of the world—actively engaging political, In 2023, the IFRS consolidated the TCFD
business, cultural, and other leaders of disclosure recommendations for investors,
society to shape global, regional, and lenders, and insurance underwriters about
industry agendas (though not without the climate-related financial risks companies
controversy). Their guiding motto is face into IFRS Sustainability Disclosure
“entrepreneur­ship in the global public Standards. The FSB created TCFD in
interest.” Past WEF initiatives include a 2015 and achieved high global adoption.
trillion tree campaign, the Fourth Industrial Concurrent with the release of its 2023
Revolution, and the Platform for Accelerating status report on October 12, 2023, the
the Circular Economy. TCFD disbanded. Companies applying IFRS
S1 General Requirements for Disclosure of
https://www.weforum.org/
Sustainability-related Financial Information
and IFRS S2 Climate-related Disclosures
 Industry 9

meet the TCFD recommendations as the Chartered Financial World Business Council for
recommendations are fully incorporated into
Analyst (CFA) Institute Sustainable Development
the ISSB’s Standards.
As an association of investment (WBCSD)
https://www.ifrs.org/sustainability/tcfd/
professionals, CFA Institute aims to The WBCSD is a global organization of
Consolidated into: IFRS Sustainability promote the highest standards of ethics, 200+ leading businesses working together
Disclosure Standards education, and professional excellence to accelerate the transition to a sustainable
for the ultimate benefit of society. Their world. By providing a science-based
Principles for Responsible voluntary Global ESG Disclosure Standards approach and actionable business solutions,
for Investment Products are designed they aim to help companies realize SDGs
Investment (PRI) to communicate information about an that lead to a more equitable net-zero
The PRI is a United Nations-supported investment product’s consideration of ESG and nature-positive future. Ultimately, the
network that encourages investors to issues in its objectives, investment process, WBCSD’s vision is to create “a world in
enhance returns and better manage or stewardship activities. which 9+ billion people are living well, within
risks through responsible investment. planetary boundaries, by mid-century.”
https://www.cfainstitute.org/
They promote six key principles, from
https://www.wbcsd.org/
“incorporating ESG issues into investment
analysis and decision-making processes” GHG Protocol collaborator
to “reporting on activities and progress
towards implementing the Principles.”

https://www.unpri.org/

Founding member: UN Global Compact

Founding member: UNEP FI
ESG ratings, benchmarks, and indices 10

These organizations and Morgan Stanley Capital International (MSCI) ESG Ratings
initiatives arm the public with
An MSCI ESG Rating measures a into one of three categories: “leader” (AAA,
ample sustainability data, company’s resilience to long-term, financially AA), “average” (A, BBB, BB), or “laggard”
encouraging corporate social relevant ESG risks. Drawing from publicly (B, CCC). With this tool, you can search for
available data, MSCI uses a rules-based the ESG rating of over 2,900 companies.
responsibility and smarter
methodology to identify industry leaders
investments. https://www.msci.com/our-solutions/esg-
and laggards according to their exposure to
investing/esg-ratings
ESG risks and how well they manage those
CDP risks relative to peers. Companies can fall

CDP—formally, the Carbon Disclosure

Project—is a nonprofit charity that helps
companies and cities disclose their
environmental impact. Data is collected via
CCC B BB BBB A AA AAA
annual questionnaires about climate change,
forests, and water security. Through their
global disclosure system, the CDP has the Laggard Average Leader
world’s most comprehensive collection of A company lagging in A company with a mixed or A company leading its
self-reported environmental data. its industry based on its unexceptional track record of industry in managing
high exposure and failure managing the most significant the most significant
https://www.cdp.net/
to manage significant ESG risks and opportunities ESG risks and
SBTi collaborator ESG risks. relative to industry peers. opportunities.
 ESG ratings, benchmarks, and indices 11

Morningstar Sustainalytics S&P Sustainability & Climate FTSE4Good Index Series

Indices
Founded in 1992, Sustainalytics is a Launched by the FTSE Group in 2001,
leading independent ESG and corporate This suite of indices incorporates highly the FTSE4Good Index Series is designed
governance research, ratings, and recognized datasets and aligns with global to help ESG investors identify socially
analytics firm that rates the sustainability standards. The indices include the well- responsible companies worth their
of listed companies based on their ESG known Dow Jones Sustainability Indices consideration. To be included in the
performance—focusing specifically on (DJSI), regional headline benchmarks, net FTSE4Good Index Series, companies must
sustainability risk. zero and low-carbon climate approaches, score highly in measures of ESG practices.
and thematic strategies targeting hydrogen
https://www.sustainalytics.com/ https://www.ftserussell.com/products/
and clean energy, among other themes,
indices/ftse4good
and deliver a comprehensive view of
environmental, social, and governance risk,
opportunity, and impact.

https://www.spglobal.com/esg/solutions/
indices
 ESG ratings, benchmarks, and indices 12

ISS ESG Indices Global Real Estate

Sustainability Benchmark
With over 30 years of experience working
with asset managers and owners, ISS (GRESB)
ESG is a leading source of sustainable and Created in 2009, GRESB is a mission-
responsible investment solutions. ISS ESG driven organization that provides actionable
develops indices and collaborates with and transparent ESG data to financial
global index providers to create innovative markets. They collect, validate, score, and
solutions based on high-quality, reliable, and benchmark ESG data to provide business
relevant ESG data. intelligence, engagement tools, and
regulatory reporting solutions for investors,
https://www.issgovernance.com/esg/index-
asset managers, and the wider industry.
solutions/
Their vision is an investment industry that
plays a central role in creating a sustainable
world.

https://gresb.com/
Southeast Asia 13
Southeast Asia 14

Unified Approaches with Local Variations to Sustainability Reporting

Singapore: Starting from fiscal year to create a roadmap for adopting the ISSB Companies with a capital between 5 billion
FY2025, Climate Related Disclosures Standards. The Hong Kong Institute of NT$ and 10 billion NT$ will follow over
(CRD) including Scope 1 and Scope 2 Certified Public Accountants (HKICPA) FY2027, and other listed companies by
GHG emissions will become mandatory for has been designated as the sustainability FY2028.
listed companies, and from FY2027 for large reporting standard setter. Mandatory
non-listed companies with annual revenue disclosure of Scope 1 and Scope 2 GHG These timelines and specific group targets
larger than 1 billion SG$ and total assets emissions will be required for large cap across Singapore, Malaysia, Hong Kong,
larger than 0.5 billion SG$. Additionally, and other main board issuers, including and Taiwan reflect each jurisdiction’s
listed companies will be required to include mid-sized and small listed companies, for commitment to integrating international
Scope 3 GHG emissions from FY2026 and reporting years starting on or after 1 January standards while accommodating local
obtain external limited assurance on Scope 2025. For other disclosures, a “Comply economic and regulatory landscapes.
1 and Scope 2 emissions from FY2027. or explain” approach will apply in FY2025,
becoming mandatory for large cap issuers
Malaysia: Following a consultation period from FY2026.
from 15 February 2024 to 29 March 2024
by the Malaysia Advisory Committee on Taiwan: The Financial Supervisory
Sustainability Reporting, Malaysia plans to Commission released a roadmap on
adopt the ISSB standards starting FY2025. 17 August 2023 for adopting the ISSB
standards. Large cap listed companies
Hong Kong: The government collaborated with a capital of more than 10 billion NT$
with financial regulators and stakeholders will need to report starting over FY2026.
 15
Singapore Malaysia Hong Kong

Industry Industry Industry

Singapore Exchange (SGX) Bursa Malaysia Hong Kong Stock Exchange (HKEX)
https://www.sgxgroup.com/ https://www.bursamalaysia.com/ https://www.hkex.com.hk/

Institute of Singapore Chartered Malaysian Institute of Accountants (MIA) Hong Kong Institute of Certified Public
Accountants (ISCA) https://mia.org.my/ Accountants (HKICPA)
https://www.isca.org.sg/ https://www.hkicpa.org.hk/
Standards & standards setters
Standards & standards setters Standards & standards setters
Malaysia Accounting Standards Boards
Singapore Exchange Regulations (MASB) Financial Services and the Treasury
(SGX RegCo) https://www.masb.org.my/ Bureau (FSTB)
https://regco.sgx.com/
Financial Reporting Foundation (FRF) https://www.fstb.gov.hk/en/
Regulators and supervisors https://www.masb.org.my/pages.php?id=9
Regulators and supervisors
Accounting and Corporate Regulatory Regulators and supervisors
Authority (ACRA) Securities & Futures Commission of
https://www.acra.gov.sg/ Securities Commission Malaysia Hong Kong (SFC)
https://www.sc.com.my/ https://www.sfc.hk/
Monetary Authority Singapore (MAS)
https://www.mas.gov.sg/ Bank Negara Malaysia Hong Kong Monetary Authority (HKMA)
https://www.bnm.gov.my/ https://www.hkma.gov.hk/eng
 Southeast Asia 16
Taiwan

Industry
Taiwan Stock Exchange (TWSE)
https://www.twse.com.tw/en/

National Federation of CPA Associations

(NFCPAA)
https://www.roccpa.org.tw/eng/

Standards & standards setters

Accounting Research and Development
Foundation (ARDF)
https://www.ardf.org.tw/english/

Regulators and supervisors

Financial Supervision Commission (FSC)
of the Republic of China (Taiwan)
https://www.fsc.gov.tw/en/

Central Bank of the Republic of China

(Taiwan)
https://www.cbc.gov.tw/en/mp-2.html
Standards & standards setters 17

Around the world, these Global Sustainability Standards Board IFRS Foundation
(GSSB)
standards and standards
Working in the public interest, the GSSB is The IFRS Foundation is a nonprofit public
setters are actively shaping responsible for setting the GRI Standards. interest organization best known for the
the way companies report on The board is composed of a range of IFRS Accounting Standards, a single set
experts who provide valuable multi- of high-quality, understandable, enforceable,
sustainability.
stakeholder perspectives on sustainability and globally accepted financial disclosure
reporting. standards. In 2021, the IFRS Foundation
Global Reporting Initiative (GRI) https://www.globalreporting.org/standards/
changed its constitution to accommodate
the development of international sustainability
global-sustainability-standards-board/
Headquartered in Amsterdam, GRI is an reporting standards, and in 2022 the Value
independent international organization that Reporting Foundation (VRF) and Climate
works with businesses, investors, policy­ Global Reporting Initiative (GRI) Standards Disclosure Standards Board (CDSB)
makers, civil society, labor organizations, The world’s most widely used standards consolidated into the IFRS Foundation to
and other experts to develop impact for sustainability reporting, the GRI help develop these new global standards.
reporting standards and promote their use Standards help organizations respond to
by organizations around the world. emerging ESG information demands from As a result of this consolidation, the IFRS
stakeholders and regulators. The GRI Foundation now governs the frameworks
https://www.globalreporting.org/
Standards are regularly reviewed to ensure and existing standards previously managed
Works in cooperation with UN Global Compact they always reflect the global best practices by the VRF and CDSB: Integrated Thinking
IFRS Sustainability Standards Board for sustainability reporting. Principles, Integrated Reporting Framework,
collaborator and SASB Standards.
https://www.globalreporting.org/standards/
EU Sustainability Reporting Standards
https://www.ifrs.org/
‘co-constructor’
 Standards & standards setters 18

Integrated Thinking Principles topics and metrics to inform what companies standards backed by the G7, the G20,
Designed and formerly managed by the should include in their integrated reports. In the International Organization of Securities
IIRC, this resource is intended to guide doing so, the SASB Standards lend insights Commissions (IOSCO), the Financial
better board and management planning and into the subset of sustainability issues that Stability Board, African Finance Ministers
decision-making. Overall, these principles are most closely tied to an organization’s and Finance Ministers and Central Bank
empower holistic thinking about 1) the ability to create long-term value for investors. Governors from more than 40 jurisdictions.
resources and relationships an organization The SASB Standards have also been
https://www.ifrs.org/groups/international-
uses or affects and 2) the dependencies consolidated into the standards developed
sustainability-standards-board/
and trade-offs that crop up as value is by the ISSB.
created.
https://sasb.ifrs.org/standards/ IFRS Sustainability Disclosure
Integrated Reporting Framework Consolidated into: IFRS Sustainability Standards
Also formerly managed by the IIRC, this Disclosure Standards
In 2023, the ISSB published two
resource provides principles-based,
sustainability reporting standards: IFRS S1
multi-capital guidance for comprehensive International Sustainability Standards
– General Requirements for Disclosure
corporate reporting. The end goal is a clear Board (ISSB)
of Sustainability-related Financial
and concise representation of how the The ISSB is a standard-setting body
Information and IFRS S2 – Climate-
organization creates value established in 2021–2022 under the IFRS
related Disclosures. Many jurisdictions
now and in the future. Foundation, whose mandate is creating
globally have mandated or will mandate
and developing global sustainability-related
companies to report their sustainability
SASB Standards financial reporting standards to meet
performance using these standards.
Created by the SASB, this investors’ needs for sustainability reporting.
resource provides detailed, The ISSB has international support with its https://www.ifrs.org/issued-standards/ifrs-
industry-specific disclosure work to develop sustainability disclosure sustainability-standards-navigator/
 Standards & standards setters 19

IFRS Sustainability Disclosure Taxonomy International Public Sector

The IFRS Sustainability Disclosure
Accounting Standards Board
Taxonomy (SDT) facilitates electronic,
machine-readable reporting of sustainability- (IPSASB)
related financial information. The ISSB
opened the Proposed IFRS Sustainability The IPSASB works to improve public sector
Disclosure Taxonomy for comments until financial reporting worldwide through the
September 26, 2023, on July 27, 2023, development of international accrual-based
and is working towards a prospective accounting standards used by global
Taxonomy. Jurisdictions mandating the IFRS governments and other public sector
Sustainability Disclosure Standards may entities.
also require electronic reporting using the
https://www.ipsasb.org/
IFRS SDT.

https://www.ifrs.org/projects/work-plan/ifrs-
sustainability-disclosure-taxonomy/
1 2 3 4 5
European Union 20

As a lawmaker and leader in European Securities and Non-Financial Reporting

championing ESG measures, Markets Authority (ESMA) Directive (NFRD)
the EU has introduced several As an independent European Union Enacted in 2014, the NFRD is a law that
mandates to accelerate authority, ESMA helps safeguard the sets rules on the disclosure of non-financial
stability of the EU’s financial system by and diversity information by certain large
the widespread adoption
enhancing the protection of investors and companies. EU rules on non-financial
of transparent, sustainable promoting stable, orderly financial markets. reporting currently apply to large public-
business practices. https://www.esma.europa.eu/
interest companies with 500+ employees.
This covers approximately 11,700 large
companies and groups across the EU,
European Single Electronic Format including listed companies, banks,
(ESEF) insurance companies, and other companies
Since January 1, 2020, issuers on EU- designated by national authorities as public-
regulated markets have been required to interest entities.
prepare their annual financial reports in
this new electronic reporting format. In CSRD predecessor
the future, the Corporate Sustainability
Reporting Directive aims to extend ESEF to
also cover non-financial reporting.

https://www.esma.europa.eu/policy-
activities/corporate-disclosure/european-
single-electronic-format
 European Union 21

Corporate Sustainability EFRAG European Sustainability

Reporting Directive (CSRD) Reporting Standards (ESRS)
Formally known as the European Financial
The CSRD mandates EU member states Reporting Advisory Group, EFRAG is a On July 31, 2023, the European
to implement into national law—by July 6, private association established in 2001 Commission adopted the first set of
2024—that companies meeting specific with the encouragement of the European European Sustainability Reporting
criteria must report their sustainability Commission to serve the public interest. Standards (ESRS) mandated by the
strategy and performance using the EFRAG extended its mission in 2022 Corporate Sustainability Reporting Directive
European Sustainability Reporting following the new role assigned in the (CSRD). The set consists of two ‘cross-
Standards. It is the successor of the Non- CSRD and tasked with developing the EU cutting’ standards, ESRS 1 and ESRS 2,
Financial Reporting Directive (NFRD). The Sustainability Reporting Standards. five environmental standards, ESRS E1-E5,
CSRD will ultimately apply to nearly 50,000 four social standards, ESRS S1-S4, and
https://www.efrag.org/
entities in the EU, starting with the around the governance standard ESRS G1. The EU
12,000 companies to which the NFRD member states are now in the process of
applies, in their annual report over 2024. EFRAG Sustainability Reporting Board incorporating these standards in legislation.
The EFRAG SRB is responsible for all
https://finance.ec.europa.eu/regulation-and- https://efrag.org/lab6
sustainability reporting positions of EFRAG,
supervision/financial-services-legislation/
including technical advice to the European Will be mandated per the CSRD
implementing-and-delegated-acts/
Commission (EU) on draft EU Sustainability
corporate-sustainability-reporting-directive_
Reporting Standards.
en
https://efrag.org/About/Governance/40/
NFRD successor
EFRAG-Sustainability-Reporting-Board
 European Union 22

Sustainability Reporting XBRL Sustainable Finance EU taxonomy

Taxonomies
Disclosure Regulation (SFDR)
The European Commission (EC) has The EU taxonomy is a classification system
tasked EFRAG to develop the digital Included in the EU’s sustainable that establishes a list of environmentally
XBRL taxonomy for the first European development policy agenda, the SFDR sustainable economic activities (e.g.,
Sustainability Reporting Standards is designed to increase transparency on conservation forestry, composting of bio-
(ESRS) set. EFRAG expects to deliver the sustainability among financial institutions waste, electricity generation from wind
final XBRL taxonomy to the EC and the and market participants. It consists power). It’s intended to create security for
European Securities and Market Authority of disclosure requirements on the investors, protect private investors from
(ESMA) in the summer of 2024. Based on organizational, service, and product levels greenwashing, help companies become
this taxonomy, ESMA will develop technical with the aim of standardizing sustainability more climate-friendly, mitigate market
requirements for tagging ESRS disclosures performance, preventing “greenwashing,” fragmentation, and help shift investments
using the European Single Electronic and empowering more informed sustainable where they are most needed.
Format (ESEF). investment decisions.
https://ec.europa.eu/info/business-
https://www.efrag.org/Lab4 https://finance.ec.europa.eu/sustainable- economy-euro/banking-and-finance/
finance/disclosures/sustainability-related- sustainable-finance/eu-taxonomy-
disclosure-financial-services-sector_en sustainable-activities_en
Regulators and supervisors 23

These bodies enforce International Organization Network for Greening the

modern ESG mandates of Securities Commissions Financial System (NGFS)
set by lawmakers, thereby (IOSCO) Launched at the Paris One Planet Summit in
accelerating the shift toward a Founded in 1983, IOSCO is an international 2017, NGFS is a network of central banks
body that brings together the world’s and financial supervisors committed to
green economy.
securities regulators. They develop, accelerating the shift toward green finance
implement, and promote adherence to and developing recommendations for central
internationally recognized standards for banks’ role in mitigating climate change.
securities regulation.
https://www.ngfs.net/
https://www.iosco.org/
Research organizations 24

As leaders in the research Greenhouse Gas (GHG) Science Based Targets

space, these organizations Protocol Initiative (SBTi)
play a significant role in Born from a collaboration between the The SBTi is a partnership between CDP,
shaping a more sustainable World Resources Institute (WRI) and the the United Nations Global Compact, World
World Business Council for Sustainable Resources Institute (WRI), and the World
future by sharing science-
Development (WBCSD), the GHG Protocol Wide Fund for Nature (WWF). By sharing
based targets and supplies the world’s most widely used science-based emissions reduction targets,
comprehensive accounting greenhouse gas accounting standards. they empower companies to fight global
Their comprehensive, standardized warming while seizing the benefits of
standards with companies
global frameworks measure and transitioning to a net-zero economy. Since
around the world. manage greenhouse gas emissions from 2015, 1,000+ companies have joined the
governments, industry associations, NGOs, initiative—united in the SBTi’s mission of
World Resources Institute businesses, and other organizations. achieving decarbonization and preventing
the worst impacts of climate change.
(WRI) https://ghgprotocol.org/
https://sciencebasedtargets.org/
WRI is a global research nonprofit formed Collaborator: World Resources Institute
in 1982 with funding from the MacArthur Collaborator: WBCSD Collaborator: World Resources Institute
Foundation. WRI’s activities are focused on Collaborator: CDP
seven areas: food, forests, water, energy, Collaborator: United Nations Global
cities, climate, and ocean. Compact

https://www.wri.org/

GHG Protocol collaborator

SBTi collaborator
Key ESG concepts 25

From greenhouse gases to net Long-term value creation effect, contributing to global warming
and climate change. The largest part of a
zero, these are some of the
When engaging in long-term value creation, typical corporate GHG footprint is in the
most frequently used terms in corporate leaders must consider what company’s value chain—from the goods a
sustainability conversations. actions they can take now to benefit company purchases to the disposal of the
their business in the future. In this day products it sells.
and age, creating long-term value means
Financial materiality
focusing on a broad set of stakeholders, Carbon dioxide equivalent (CO2e)
This term refers to information that both including employees, consumers, suppliers, CO2e is a standard unit for measuring
informs sound investment decisions and communities, government, investors, and the global warming potential of different
would have a significant impact on the price shareholders. As socially responsible greenhouse gases. For any quantity and
of a company’s securities once disclosed. companies continue rising above type of greenhouse gas, CO2e signifies the
competitors, ESG will be an increasingly amount of carbon dioxide that would have
Double materiality important factor in creating long-term value the equivalent global warming impact.
for organizations across the globe.
Double materiality refers to the fact that risks Upstream and downstream emissions
and opportunities can be material from both Greenhouse Gasses (GHGs) Upstream emissions occur during an
a financial and non-financial perspective— organization’s production and processing
impact materiality. In other words, At the core of climate change conversations, operations, before the point of sale.
companies are responsible for their adverse GHGs are compound gases that trap heat Downstream emissions, on the other hand,
impacts on both society and the planet. in the atmosphere through a widely known occur after the sale by the producer. This
phenomenon called the greenhouse effect. includes distribution and storage, use of the
The buildup of GHGs since the Industrial product, and end-of-life.
Revolution has accelerated the greenhouse
 Key ESG concepts 26

Scope 1, 2, and 3 emissions Net zero

The GHG Protocol outlines three different
types of greenhouse gas emissions. Scope Net zero refers to an ideal state of balance
1 refers to direct emissions released from between the amount of greenhouse gas
sources that are controlled or owned by produced and the amount removed from the
an organization. Scope 2 refers to indirect atmosphere. Around the world, companies
emissions associated with the purchase of are striving to reach a net zero state in
electricity, steam, heat, or cooling. Finally, hopes of tackling climate change and
Scope 3 refers to emissions that are the shaping a more sustainable future.
result of activities from assets not owned or
controlled by the reporting organization.
 27

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