Cheat sheet of global ESG

frameworks
A list of the major regulatory and
voluntary global ESG frameworks

CSRD

EU

TAXONOMY

SDS
SFDR
 Contents:
Part 1: ESG Regulation in the EU

Part 2: ESG Regulation in the UK

Part 3: ESG Regulation in the US

Part 4: Global voluntary ESG frameworks

Introduction:

EY estimates that there are over 600 ESG reporting standards worldwide. This

makes it incredibly difficult for companies and investors to deduce the most

significant frameworks to focus their ESG disclosure efforts on. However,

convergence is beginning to happen - from regulation to voluntary commitments,

measuring performance is becoming easier as the reporting landscape matures.

Consolidation of frameworks and international support for the ISSB’s IFRS S1 and S2

standards is making ESG reporting easier.

Nevertheless, navigating the disparate frameworks can be confusing at best, and

daunting at worst. Therefore, we have compiled a list of the most significant

frameworks, explaining what they are and, in the case of ESG regulation, who must

comply. This whitepaper is by no means exhaustive but aims to give an overview of

the main frameworks which govern our clients’ ESG ecosystem. For tailored guidance

on your specific compliance requirements, please get in touch with our compliance

experts.

Noor van Houte

Noor is the product manager at KEY ESG. Having studied EU law, she has an extensive background in EU
regulations, and previously worked for Accenture in the intersection of business and software.

Cheat sheet of global ESG frameworks

 Part 1 - ESG Regulation in the EU
EU Taxonomy EU

TAXONOMY

What is it?

The EU taxonomy is a classification system that defines criteria for economic activities that
are aligned with net zero by 2050 and other environmental goals. It is a tool that supports
the EU’s sustainable finance framework to direct investments to the economic activities
most needed for the transition.

Who must comply?

Companies based in the EU with more than 500 employees have an obligation to report
their alignment with the EU taxonomy.

Since January 2022, all in scope companies have needed to report the proportion of their
turnover, Capex, Opex, AUM (for asset managers) or Green Asset Ratio (for banks and credit
institutions) that is Taxonomy-eligible. Read more about what the EU taxonomy means for
asset managers/private equity funds here.

Since January 2023, all non-financial corporates must report the proportion of their
turnover, CapEx and OpEX that are taxonomy-aligned.

From January 2024, all financial firms must report the taxonomy alignment of their
investments, but only for investee companies that have reported their alignment.

Cheat sheet of global ESG frameworks

 Part 1 cont.
CSRD CSRD
What is it?

The Corporate Sustainability Reporting Directive (CSRD) is an annual reporting requirement

that mandates companies to disclose externally assured sustainability information, from a
double materiality perspective. This means that both environmental, social and governance
issues that affect the company and those that affect people and the environment must be
reported on. These two are distinguished as financial materiality and impact materiality but
are interrelated.

Who must comply?

For reporting in 2025, companies subject to CSRD are those that were already subject to EU’s
NFRD regulations.

For reporting in 2026, those that meet at least 2 of the following criteria must report:

· More than 250 employees

· Net turnover exceeding €50 million

· Over €25 million in total assets

For reporting in 2027, listed SMEs that meet at least 2 of the following criteria must also
report:

· Balance sheet total of over €5mn

· Over €10mn in net turnover

· Average of 50 employees during the financial year

For reporting in 2029, non-EU companies that generate net turnover of over €150mn will be
subject to reporting requirements.

Read our ultimate guide to CSRD compliance here.

Cheat sheet of global ESG frameworks

 Part 1 cont.
SFDR
What is SFDR?

The Sustainable Finance Disclosure Regulation (SFDR) is a classification system and

transparency framework that sets out how financial market participants (FMPs) must
disclose sustainability information, helping investors who seek to put money into
companies and projects supporting sustainability objectives to make informed choices. It
also helps investors to properly assess how sustainability risks are integrated into the
investment decision making process. Funds are classified into Article 6, 8 or 9, each
requiring certain criteria.

Who must comply?

All FMPs in the EU, or those marketing themselves in the EU must report. FMPs include:

· An insurance company that makes available an insurance-based investment product

Investment firms that provide portfolio management

· An institution for occupational retirement provision

· A manufacturer of pension products

· An alternative investment fund manager

· A pan-European personal pension product provider manager of a qualifying VC fund

· A manager of a qualifying social entrepreneurship fund

· A management company for UCITS

· A credit institution that provides portfolio management

The products that it encompasses include (not exhaustive): investment and mutual funds,
UCITS, insurance-based investment products, private and occupational pensions and
insurance and investment advice.

Read this article to find out more about SFDR.

Cheat sheet of global ESG frameworks

 Part 2 - ESG Regulation in the UK
TCFD
What is TCFD?

In 2022, the UK implemented regulations based on the TCFD framework for asset owners,
managers and companies. The TCFD framework follows four pillars: governance, strategy,
risk management and metrics and targets. This is a continuously evolving space because,
with the news that the ISSB has incorporated the TCFD into their IFRS S1 and S2 standards,
the UK has announced that their new Sustainability Disclosure Standards will follow IFRS
S1 and S2 guidelines.

Who must comply?

While there was a tiered calendar of TCFD implementation depending on the type of
entity listed below, all are now under the scope of regulatory reporting. Entities included in
the regulations are:

· Large UK companies that are either publicly traded, banking companies, insurance
companies, or companies that have more than £500mn in annual turnover and have more
than 500 employees

· Traded LLPs, banking LLPs or LLPs with more than £500mn in annual turnover and more
than 500 employees

· Issuers of standard or premium listed shares or issuers of Global Depository Receipts

(GDRs)

· Asset managers with over £5bn in AUM

· Asset owners with over £5bn AUM or assets under administration

· Occupational pension schemes with over £1bn AUM

Read this article to find out how TCFD is relevant to private equity fund managers.

Cheat sheet of global ESG frameworks

 Part 2 cont’d

SDR

What is it?

The Sustainability Disclosure Requirements (SDR) are product labelling and naming and

marketing rules, implemented to eliminate greenwashing and improve trust and

consumer protection. The labelling scheme encompasses four product labels:

‘Sustainability focus’, ‘Sustainability improver’, ‘Sustainability impact’ and ‘Sustainability

mixed goals’. They set the rules for financial market participants, outlining disclosure

requirements on a consumer, product and entity level.

Who must comply?

All FCA-authorised firms that make sustainability-related claims about their products and

services, from the 31st of May 2024.

Read this article to find out about the finalised SDR regulations.

SDS SDS

What is it?

The Sustainability Disclosure Standards (SDS) will set out corporate disclosures on the

sustainability-related risks and opportunities that companies face. They will be based on

the ISSB’s IFRS S1 and S2 standards, with the UK government’s secretary of state for

business and trade aiming to endorse the first set of standards by July 2024.

Who must comply?

To be confirmed.

Cheat sheet of global ESG frameworks

 Part 3 - ESG Regulations in the US
SEC Climate Disclosures
What are they?

The SEC has proposed mandating certain climate-related disclosures such as climate
risks for publicly listed companies. The proposal is aligned with the TCFD framework and
could include GHG emissions (scope 1, 2 and 3), disclosure of climate-related risk, impacts,
targets and goals, systematic management of offsets and REC’s and the articulation and
management of a transition plan. This initiative is under threat, however, from Republican
lawmakers that have argued it would be burdensome for corporates, especially calculating
scope 3 emissions. The disclosure requirements do not currently have a set date for
finalisation.

Who must comply?

To be confirmed

California Climate

disclosure laws
What are California’s climate disclosure laws?

California has jumped ahead of the SEC climate disclosures and implemented its own
laws. The bills require GHG emissions reporting in compliance with the GHG Protocol,
climate-related financial risk reporting in line with the TCFD and disclosure of information
about certain emissions claims and the sale and use of carbon offsets.

Who must comply?

Any US business, both public and private, with total annual revenues exceeding $1bn that
is ‘doing business’ in California. Scope 1 and 2 emissions reporting will be required annually
from 2026, and scope 3 in 2027.

US companies exceeding $500mn in total annual revenues that are ‘doing business’ in
California will have to disclose climate-related financial risk reports, in line with TCFD.
Reports must be submitted by 1st June 2026.

Cheat sheet of global ESG frameworks

 Part 3 - ESG Regulations in the US
California VC diversity

disclosure laws
What are California’s VC diversity laws?

A covered entity must report the following demographic information for the founding
teams of all portfolio companies in which the covered entity invested in the prior calendar
year (to the extent the information was provided pursuant to the survey described below):
gender identity, including non-binary and gender-fluid identities, race, ethnic identity,
disability status, veteran status, whether such person identifies as LGBTQ+ and whether
such person is a California resident, at an aggregated level and on an anonymised basis.

Covered entities also must report the total amount of investments in the prior calendar
year in portfolio companies that were primarily founded by diverse founding teams (i.e.,
where at least half of the founding team is made up of people of diverse backgrounds and
perspectives), as a percentage of venture capital investments made by the covered entity,
in the aggregate and broken down according to the demographic categories listed above,
as well as the total amount of money in venture capital investments the covered entity
invested in each portfolio company during the prior calendar year and the principal place
of business of each portfolio company in which the covered entity made an investment
during the prior calendar year.

The information should be collected via a standardised survey, established by the California
Civil Rights Department (CRD).

Who must comply?

Any venture capital firm operating in the state (that includes VC firms headquartered in
California, have operations in the state, have invested in companies that operate in or are
based in the state, or have received investments from California residents) must report. As
it currently stands, the first report will be due on March 1, 2025

Cheat sheet of global ESG frameworks

 Part 4 - Voluntary global ESG frameworks

IFRS S1 and S2
What is it?

The International Sustainability Standards Board (ISSB) was formed in 2021 at COP 26
and is the first sustainability framework to generate widespread international support,
coming from the G7, G20, and various global finance ministers. The ISSB has consolidated
various ESG framework bodies in the past few years, including the Sustainability
Accounting Standards Board (SASB), the Climate Disclosure Standards Board (CDSB) and
the Taskforce for Climate-related Financial Disclosures (TCFD). They have created the IFRS
S1 and S2 standards which more than 20 regulators issued support statements for, with
countries such as the UK, Brazil, Canada, Mexico, Singapore, Hong Kong and Japan set to
adopt the standards.

EDCI
What is it?

The Institutional Limited Partners’ Association’s ESG Data Convergence Initiative (EDCI)
is a collaborative effort by the private equity industry to establish a common framework of
ESG metrics to aid comparability and harmonise LP data requests. EDCI has over 375
members with $28tn in AUM and 4,300 portfolio companies included in its benchmarks. It
comprises the leading ESG reporting standards in the private equity industry.

Read this article for more information on the EDCI and the benefits of its benchmark
data.

Cheat sheet of global ESG frameworks

 Part 4 cont’d

PRI

What is it?

There are over 5,000 signatories of the Principles for Responsible Investment. They are

required to report on their activities annually, under 4 governance modules:

· Senior leadership statement

· Organisational overview

· Policy, governance and strategy

· Manager selection, appointment and monitoring

There are also 6 required asset class modules:

· Listed equity

· Fixed income

· Real estate

· Infrastructure

· Private equity

· Hedge funds

These sections are supplemented by reporting modules in:

· Sustainability outcomes (voluntary)

· Confidence-building measures

GRI

What is it?

The Global Reporting Initiative is the independent, international organisation working

with businesses and investors to help them understand their impacts. It incorporates the

double materiality approach, like CSRD, and is used by over 10,000 organisations in over

100 countries.

Cheat sheet of global ESG frameworks

 Part 4 cont’d

WEF

What are the WEF’s ESG metrics?

The World Economic Forum published its set of ESG metrics in 2020 to help with

‘measuring stakeholder capitalism’. They consist of 21 core and 34 expanded metrics

focused on four themes: people, planet, prosperity and principles of governance.

B Corp

What is it?

B Corp started out in the US, where ‘benefit corporation’ is a legally recognised corporate

entity that has goals of making a profit alongside a positive impact on society. Having

expanded the concept beyond the US, non-profit B lab has made B Corp a globally

recognised voluntary certification that businesses achieve by meeting high standards of

verified environmental and social performance, accountability and transparency. You may

recognise the logo and have seen it on your favourite consumer goods in the supermarket,

for example. To meet requirements, companies must reach a minimum in their B Impact

assessment score of above 80, make a legal commitment by changing their corporate

governance structure to be accountable to all stakeholders (and achieve benefit

corporation status if available in their jurisdiction), as well as exhibit transparency by

allowing public availability of information about their B impact performance.

UN SDGs
UN SDG
What is it?

The Sustainable Development Goals (SDGs), also known as the Global Goals, were

adopted by the United Nations in 2015 as a universal call to action to end poverty, protect

the planet, and ensure that by 2030 all people enjoy peace and prosperity.

The 17 SDGs are integrated—they recognize that action in one area will affect outcomes in

others, and that development must balance social, economic and environmental

sustainability. UNDP, the UN’s development agency, plays a critical role in helping

countries achieve the SDGs. Although not designed for investors, many fund managers

seek to align their investment strategies with the SDGs.

Cheat sheet of global ESG frameworks

 How KEY ESG can simplify your
reporting processes
It takes a lot of time and resource to comply with all the various regulations and frameworks,
especially as they are continuously evolving. Our software solution makes the process much
easier by allowing users to choose applicable frameworks, automatically selecting every metric
required. This means that CSRD metrics can be selected from existing SFDR data input, saving
you time and effort in repeating work. Why not book a personalised demo with a member of our
team to find out how we can make your ESG compliance processes more efficient?

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Get in touch with our team.

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Email: [email protected]

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Cheat sheet of global ESG frameworks