New Regulations For Companies: Enviromental, Social And Governance Rules

In today’s world, where effects of climate changes and environmental concerns on both sustainability of companies and the world are understood and these concerns have reached to a serious dimension, companies, considering the costs on the society, have specified managerial rules and aimed the capital to turn towards sustainable companies without waiting the state to legislate a regulation.

These regulations firstly effect the investors and it is aimed both the capital flow and the entire economic system to turn toward compliance with these rules. Within this context, the European Securities and Markets Authority (ESMA) has announced how they have planned to develop the sustainable financing by including environmental, social and governance (ESG) factors in its annotation on 6 February 2020. A projection has been built by evaluating the sustainable financial strategy, ESMA transparency obligations, process control and priorities of national inspection practices and aimed for creating a joint approach to include ESG Rules to inspection practices of national authorities. ESMA has announced that they will complete the regulations on transparency obligations with the EU Information Regulation and to cooperate with European Banking Authority (EBA) and European Insurance and Occupational Pensions Authority to create common technical standards.

Using the existing data to analyze financial risks stemming from the climate change, which may potentially involve the use of climate related stress tests in various areas of the market is one of the other priority areas. In addition to climate-related stress test, it is also planned to develop a monotype definition of criterion and methods to understand the ESG risks on institutions and technical standards.
Within this scope, the definition of sustainability for companies is variable and concrete measures taken against carbon emission and climate change are evaluated in particular. Beside this, 17 Sustainable Development Goals specified by United Nations are also taken into account.

In October last year, a group consists of 46 country and 130 banks have signed a series of United Nation Principles designed to promote a responsible and sustainable banking system in accordance with global climate change and sustainable development goals. In this sense, the process of accepting soft rules, which started in financial institutions; It is believed that it will show an alteration towards all companies and obligatory legal rules and a body of continuously developing regulations will be formed for the sustainable economy.

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