For decades, financial institutions and other companies have been voluntarily reporting on their stewardship towards environmental, social and governance (ESG) issues. However, in the last few years, regulators across the globe have started to mandate disclosure of non-financial information. Without any doubt, this is a major international regulatory trend in the areas of corporate responsibility and sustainable finance.

Disclosure of non-financial information is seen by regulators as one of the first steps in the journey toward solving complex issues. It compels entities to build an understanding of their current situation in relation to the institutions’ exposure to problems such as climate change and gender pay gaps. Therefore, disclosure requirements are often coupled with a softer regulatory approach in which entities are expected to ‘comply or explain’.

Observation of the regulatory landscape around disclosure of non-financial information allows for the identification of a common approach embraced by regulators, who often expect that entities report on:

• how ESG considerations are incorporated into corporate management (strategies, results, and risks) and investment policies;
• diversity information about the board of directors, including age, gender, educational and professional background, as well as information on board policies on these issues; and
• the outcome of supply chain due diligence on issues such as human rights.

Last, but not the least, a word of caution: when disclosing non-financial information, entities should strive to maintain a consistent approach towards what they consider material in financial and non-financial disclosure in order to prevent liabilities and fines.

For a complete and comprehensive overview of disclosure laws and regulations applicable to the financial sector, please check the ECOFACT Policy Outlook Tool. There you will also find similar briefings on different trending regulatory topics. These briefings are updated every month and available in different formats.