Investors across the Australian Stock Exchange (ASX) will drive ESG targets in the future, The Growth Activists CEO Rosanna Iacono said at Ragtrader Live in Melbourne last week. 

Iacono said Australia is seeing a strong rush to working with the rest of the world when it comes to ESG targets.

"The IFRS standards 1 and 2 for climate disclosures and sustainability - that's a massive topic right now with boardrooms around Australia," she said. "And there will be legislation for that in the next six months.

"We're going to see a lot more follow. We're going to see more and more topics entering, and circularity will be one.

"Some people think that investors will shun the whole idea of circularity reform, but I think it's actually going to be the inverse."

According to Iacono, 43 cents of every professionally managed dollar in Australia is now in some sort of ethical fund. She added that 80% of superannuation investments are predicated on those businesses having a net zero target.

"Circularity is going to be added to the agenda sooner or later - it's coming."

Earlier in the speech, Iacono said the ESG target topic is undergoing a pincer effect in Australia. 

On the one hand, she said, there are stakeholders, governments, standards organisations, NGOs, citizens, employees, business leaders, etc.

"On the other, you have the slightly bigger side of the pincer: you have investors and financial institutions," she said.

"So whilst governments are playing an incredibly important role in consulting with a very broad group of stakeholders in developing policies and driving reform, the reality is that the financial community is having a disproportionate influence on some of that legislation coming to the fore.

"And there's a key reason for this: they are looking for consistency in reporting for comparability reasons. They want to have an apples-to-apples comparison for the businesses that they invest in, and they also do want to see businesses with better ESG embedded into their practices. That's because they're also looking to reduce risk.

"So I think it's really important to start with that as a baseline and understand that disproportionate really upsized influence of capital markets in driving ESG reform globally."

Iacono gave a 30-minute presentation at Ragtrader's half-day conference in Melbourne on current and upcoming local and global regulations and extended product responsibility schemes. 

She said there are six key themes when it comes to emerging regulatory reform on ESG around the world: climate change, sustainable finance, human rights, labour practices, governance, and circular systems.

"They are all interconnected as all ESG topics are - one doesn't really go without the other," Iacono said. "There's a lot of interdependencies between these policies.

"The key reason that governments are driving them is because they are looking at increased levels of disclosure; they want to see new ESG metrics embedded, they want to see ESG integration into financial investment decisions, and they just want to see ESG risk elevated in general."

Iacono then narrowed the lens on the apparel sector, revealing five key buckets, including respectful and secure work environments, better wage systems, resource stewardship, smart material choices, and circular systems.

"So what you're actually seeing is really great overlap with the six key things we saw on the previous slide, which are cross-sector," she said.

"Now, one of the trends that we're seeing is a little bit concerning but completely understandable: we're seeing different regions going it alone because they're frustrated. They don't want to wait for regional reform, or they don't want to wait for national reform.

"We're seeing individual countries, and in some cases, even individual states, just going for it."

Iacono offered examples including the Uyghur Forced Labor Prevention Act introduced in the US last year, new French labelling laws launched earlier this year, and the New York Fashion Act which Iacono said is imminent.

"Whilst all of these laws are incredibly well-intentioned, what is happening is the lack of consistency creates significant challenges for businesses that are trading internationally, because they need to adapt to their reporting, they need to adapt their trade documentation in different ways for different markets, and ultimately that is creating administrative burden," she said.

"But there is some good news: we are seeing increased levels of harmonisation."

Iacono said she attended the Global Fashion Summit in Copenhagen in June this year, highlighting a key presentation by the European Commissioner for Environment, Oceans and Fisheries, Virginijus Sinkevičius, New York State Assembly Member, currently working on the aforementioned New York Fashion Act, Dr Anna Kelles.

"They were both on stage together having a really valuable conversation about the differences and similarities and policies that they're looking at," Iacono said.

"These are conversations that we saw on stages throughout the two days - some really valuable dialogue taking place between legislators, academics, brands, and NGOs - where part of the discussion was also about: How do we harmonise?

"How do we reduce some of the burden for businesses to make sure that this is done in a very reasonable way?

"How can we bring everybody on the journey?"

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