G20 urged to drive better environmental, social investing practices

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* OECD cited “considerable challenges”

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* Demand for more transparency in ESG ratings

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* Comes ahead of October G20 meeting

LONDON, Oct 4 (Businesshala) – The world’s largest economies need to do more to ensure that environmental, social and governance-related ratings and investments are effective in transitioning to a low-carbon economy, an OECD report said. said on Monday.

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Launched ahead of the G20’s October meeting, the report said that while the drive to invest using the ESG criteria can help international climate objectives, “considerable challenges” need to be addressed.

In particular, the report highlighted a variety of approaches to assessing ESG issues, inconsistent data, and a lack of comparability between ESG rating methodologies.

“These competitive dynamics and challenges associated with ESG ratings and investments can compromise market integrity, undermine investor confidence and reduce the extent of environmental and climate-related impacts of investment decisions,” the report said. can.”

“Ultimately, challenges may constrain the pace and scale of capital allocation needed to achieve long-term value and tangible progress to support the transition to low-carbon economies.”

The report comes after the opening of a consultation by the International Organization of Securities Commissions on ESG ratings in July and ahead of the next round of global climate talks in November.

The OECD calls on governments to ensure global transparency, comparability and quality of core ESG metrics.

On environmental ratings in particular, the report noted that rating providers place less weight on negative environmental impacts and more attention to corporate disclosure of policies and goals, with little appraisal of their impact.

Rating providers often use a large number of sub-category scores, with the OECD calling for greater clarity on the meaning of such scores to better help investors.

Investors were also being held back by issues including “inadequate” data on the Net Zero Pathway, a lack of policy clarity about carbon pricing and support for renewable energy, and a lack of products and measurement tools to help investors meet specific climate objectives. To allow aligning the portfolio with

“Overall, greater international cooperation is needed to ensure that ESG and climate transition-related practices progress in a way that ameliorate existing market fragmentation, and strengthens investor confidence and market integrity. Is.” (Reporting by Simon Jessop; Editing by Elaine Hardcastle)

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