The World Federation of Exchanges (WFE), the global industry association for exchanges and clearing houses, has today published an open letter highlighting the barriers to capital movement caused by fragmented sustainability regulation.
The Federation is calling on forward-looking, innovative, regulators, governments and related bodies to take urgent and coordinated action to address cross-border fragmentation in sustainability regulation, for the benefit of investors, issuers and the exchanges that serve them.
Fragmented regulation hinders global growth by duplicating costs, erecting barriers to cross-border expansion, and diverting capital away from substantive sustainable outcomes toward formal compliance. The global fragmentation that currently exists in sustainability regulation creates significant costs for exchanges, listed issuers and investors operating across multiple jurisdictions and undermines their ability to manage compliance obligations efficiently. These costs impact businesses’ bottom lines, investors’ returns and what customers pay for goods and services.
To reduce unnecessary costs and complexity, and free up vital capital for substantive sustainability outcomes, the WFE calls on forward-looking regulators, governments and related bodies to act on four priorities when advancing their sustainability agendas:
- Prioritise alignment and interoperability with leading global standards, frameworks and regulations;
- Adopt principles-based, outcomes-focused approaches;
- Provide clarity, consistency and predictability for businesses; and
- Make use of deference and passporting mechanisms where appropriate.
Nandini Sukumar, Chief Executive Officer of the WFE, said: “Exchanges and their issuers operate across borders and increasingly need to manage sustainability-related obligations in multiple jurisdictions. Action to address and mitigate fragmentation in sustainability regulation is urgently needed to support more efficient compliance and help provide the clarity businesses need to plan for the long term.
The WFE and its members look forward to continuing engagement with relevant Authorities on these issues.”
The letter recommends using deference and passporting mechanisms in reducing duplicative compliance requirements across jurisdictions. These mechanisms can continue to support investor protection and market integrity without impeding the consistency, comparability and decision usefulness of outputs, the WFE says.
Read the Open Letter on Cross-border Fragmentation in Sustainability Regulation.
