With environmental, social, and governance (ESG) investing reaching a global scale, standards are developing to help add uniformity to the growing space.
Organizations with a global reach are creating certain standards in ESG. One of the areas addresses accounting measures.
“The IFRS Foundation, which oversees accounting standards in more than 140 nations, mostly in Europe and Asia, announced the creation of the International Sustainability Standards Board (ISSB) at COP26,” a Fortune article reports. “The foundation will oversee the ISSB as it does the International Accounting Standards Board, formed two decades ago.”
Meanwhile, in the U.S., the Securities and Exchange Commission (SEC) is taking the lead in developing disclosures that explain the extent of its climate control measures.
“In the U.S., financial regulators are now taking the lead,” the article says. “The Securities and Exchange Commission is mulling disclosure rules to govern what companies must tell investors about their carbon footprint. More than 4,000 individuals, companies, and associations submitted comments starting in June. A draft rule is expected next year. U.S. accounting rules follow standards crafted by its own private entity, the Financial Accounting Standards Board.”
A Global ESG ETF Sans the U.S.
Exchange traded fund (ETF) investors looking for targeted exposure to global markets sans the U.S. can check out a fund like the FlexShares ESG & Climate Developed Markets ex-US Core Index Fund (FEDM). The fund seeks investment results that correspond generally to the price and yield performance of the Northern Trust ESG & Climate Developed Markets ex–U.S. Core Index.
Best of all, the fund comes with a low net expense ratio of 0.12%, which is remarkably lower than its category average. In summary, FEDM:
- Is designed as a cost-effective core building block of a portfolio, incorporating risk controls to reduce tracking error and deliver market-like exposure relative to the starting universe.
- Applies a multi-dimensional ESG framework, incorporating exclusions across ESG controversies and business involvement while seeking to deliver ESG uplift.
- Uses the Northern Trust ESG Vector Score, which is focused on financial materiality and aligned with industry standards Sustainability Accounting Standards Board (SASB) and Tax Force on Climate Related Disclosures (TCFD), integrating not only historic metrics and indicators, but also those that assess how exposed a company may be to future risks and opportunities.
- Places intentional emphasis on reducing climate transition risk by reducing ISS carbon emissions intensity and improving ISS Carbon Risk Rating.
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