Hester Peirce, Commissioner, Securities and Exchange Commission
Washington DC: “The US Perspective”

Didier Millerot, European Commission, Head of Sustainable Finance Unit
Brussels: “The European perspective”

Christian Thimann, Goethe University Frankfurt and ICIR
“Second thoughts on involving NGOs in financial regulation”

The recent Digital Insurance Forum brought together experts in regulation, sustainability, and finance to discuss the evolving landscape of Environmental, Social, and Governance (ESG) policies. The topic evolved around the reassessment of ESG regulations in a changing political and economic environment, and the implications for businesses, regulators, and markets.

1. Diverging Global Approaches to ESG Regulation

The discussion revealed notable differences in how jurisdictions are approaching ESG regulation. In one perspective, it was argued that current ESG regulations have created undue burdens on companies, distracted from financial materiality, and distorted the capital allocation process. The point was made that ESG requirements have often treated all issues under their purview as inherently material, where market-based frameworks should prioritize issues with major impact on society or a company’s long-term financial value. This approach called for a return to materiality as a guiding principle in regulatory disclosure requirements.

In contrast, it was acknowledged that creating a comprehensive ESG framework comes with high costs, but is thought to be essential for global decarbonization efforts. Adjustments are being made to streamline requirements, reduce complexity, and tailor obligations to the capacities of different companies, particularly smaller businesses. Despite these tactical changes, the overall vision of channelling private financing toward decarbonization and achieving net-zero emissions in some parts of the world by 2050 remains central.

2. Evolving ESG Regulatory Frameworks

The forum noted that recent shifts in ESG regulation reflect a re-evaluation of its implementation, timelines, and proportionality. In some regions, rules are being challenged in court, and regulatory agencies are reconsidering their approaches to focus more on material impacts. Similarly, in other jurisdictions, efforts are underway to scale back the burden on smaller companies and simplify reporting requirements—such as reducing data collection points by substantial margins—while still maintaining the overarching goals of sustainability and transparency.

Stakeholder feedback has played a significant role in driving these adjustments. Smaller businesses, in particular, have stressed the need for proportionality in requirements, with concerns about being indirectly burdened by expectations passed down from larger companies within their value chains. Efforts to address these issues include introducing clearer guidance and common frameworks.

3. The Role of Stakeholders and NGOs in ESG Regulation

The forum also explored the influence of so-called non-governmental organizations (NGOs) in shaping ESG regulation. While NGOs have undeniably played a key role in driving awareness of climate and social issues, it was noted that their involvement has raised questions about representation and proportionality. Unlike trade unions, consumer groups, or industry associations, NGOs are not direct stakeholders in the economy or the financial system and are often focused on narrow, single-issue agendas. Concerns were expressed that this has sometimes led to policies driven by urgency and idealism, rather than balanced assessments of trade-offs and long-term impacts.

The importance of broad stakeholder representation—including industry players and consumer groups—was emphasized to ensure that regulations account for the diverse impacts on society and the economy.

4. Interplay Between Level Playing Fields and Diverging Policies

A key area of discussion centered on the balance between creating a level playing field for insurance companies and managing differing regulatory approaches globally. Some participants highlighted the potential economic consequences of applying costly ESG mandates across borders, particularly when jurisdictions have dramatically different frameworks. Others argued that establishing interoperability between systems and streamlining reporting requirements could help mitigate some of these concerns while still driving progress on shared goals like decarbonization.

Conclusion

The discussions highlighted that ESG regulations are at a crossroads, with jurisdictions reassessing their approaches to strike a balance between ambition and practicality. While some remain committed to net-zero targets and the broader objectives of sustainability, there is a growing recognition of the need to reduce administrative burdens, enhance proportionality, and focus on materiality in disclosures.

The differing perspectives presented during the Forum underscore the broader challenge of reconciling regulatory philosophies in an increasingly interconnected global economy. Businesses, regulators, and stakeholders must continue to navigate these complexities as they adapt to a rapidly evolving landscape of sustainability-focused governance.