# WIA-FIN-024: ESG Finance Standard

**Version:** 2.0
**Status:** Active
**Published:** December 2025
**Category:** Finance (FIN)

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## Major Updates from v1.x

Version 2.0 represents a comprehensive update integrating latest regulatory requirements, technological advancements, and stakeholder expectations.

### 1. Regulatory Alignment

**Full alignment with:**
- ISSB Standards (IFRS S1, S2)
- EU CSRD and Taxonomy Regulation
- SEC Climate Disclosure Rule
- TNFD Recommendations v1.0

### 2. Double Materiality Framework

**Impact Materiality:**
- Organization's impact on environment and society
- Stakeholder-focused perspective

**Financial Materiality:**
- ESG factors affecting enterprise value
- Investor-focused perspective

**Organizations MUST assess and report BOTH perspectives**

### 3. Enhanced Environmental Requirements

#### 3.1 Net-Zero Commitment

All organizations SHALL:
- Set science-based net-zero target (SBTi validated)
- Publish transition plan with milestones
- Disclose Scope 1, 2, 3 emissions (all categories)
- Report annually on progress vs. targets

**Target:** 90% absolute reduction by 2050 (2020 baseline)

#### 3.2 Biodiversity & Nature

**TNFD Disclosure Required:**
- Nature-related dependencies and impacts
- Locations of operations in sensitive areas
- Nature-related risks and opportunities
- Metrics and targets for nature-positive outcomes

#### 3.3 Circular Economy

**Mandatory Metrics:**
- Material circularity rate (target: >50% by 2030)
- Product-as-a-service revenue (%)
- Design for environment score
- Lifecycle GHG emissions (cradle-to-grave)

### 4. Advanced Social Framework

#### 4.1 Human Rights Due Diligence

**REQUIRED:**
- Comprehensive human rights impact assessment
- Salient human rights risk identification
- Mitigation measures and action plans
- Grievance mechanism with remedy
- Annual human rights report

#### 4.2 Just Transition

**Organizations in high-carbon sectors SHALL:**
- Publish just transition plan
- Stakeholder engagement on transition impacts
- Worker retraining and support programs
- Community impact mitigation strategies
- Report on jobs created/displaced

#### 4.3 Living Wage

**Target:** 100% of employees and supply chain workers earning living wage by 2030

### 5. Governance Evolution

#### 5.1 ESG-Linked Compensation

**REQUIRED:**
- At least 20% of executive compensation tied to ESG metrics
- Mix of E, S, and G metrics
- Multi-year performance periods (3+ years)
- Transparent disclosure of targets and performance

#### 5.2 Board ESG Competency

**REQUIRED:**
- At least 1 board member with deep ESG expertise
- Annual ESG training for all board members
- Board diversity targets (gender, race/ethnicity, skills)
- Regular board ESG performance evaluation

### 6. Technology Integration

#### 6.1 ESG Data Management

**Systems MUST support:**
- Real-time data collection and monitoring
- Automated ESG calculations and reporting
- AI-powered anomaly detection
- Blockchain for supply chain traceability
- API connectivity to rating agencies and regulators

#### 6.2 Digital Reporting

**REQUIRED:**
- XBRL tagging for all ESG disclosures
- Machine-readable data formats
- Integration with financial reporting systems
- Public API for ESG data access (optional but recommended)

### 7. Assurance Requirements

**Mandatory Assurance:**
- Reasonable assurance for Scope 1 & 2 emissions
- Limited assurance for material Scope 3 emissions
- Limited assurance for key social and governance metrics

**Assurance Provider:**
- Independent third party
- Appropriate credentials (ISAE 3000, ISO 14064, etc.)
- Annual assurance statement published with ESG report

### 8. Updated Scoring Framework

#### Environmental (35%)
- Climate & energy (15%)
  - GHG emissions reduction
  - Renewable energy adoption
  - Net-zero targets and progress
- Nature & biodiversity (8%)
  - Biodiversity impact
  - Nature-based solutions
- Resource efficiency (7%)
  - Water stewardship
  - Circular economy
- Pollution prevention (5%)

#### Social (30%)
- Human capital (12%)
  - Diversity, equity, inclusion
  - Employee well-being
  - Skills development
- Labor practices (8%)
  - Living wages
  - Worker safety
  - Labor rights
- Supply chain (6%)
  - Supplier assessments
  - Human rights due diligence
- Stakeholder engagement (4%)
  - Community relations
  - Customer welfare

#### Governance (35%)
- Board effectiveness (12%)
  - Independence and diversity
  - ESG oversight
- Executive accountability (10%)
  - ESG-linked compensation
  - Ethical leadership
- Transparency (8%)
  - Disclosure quality
  - Stakeholder communication
- Risk management (5%)
  - Enterprise risk including ESG
  - Cybersecurity

### 9. Green & Sustainable Finance

#### 9.1 Green Bond Principles

**Enhanced Requirements:**
- External review (pre-issuance)
- Annual impact reporting with metrics
- Post-issuance verification (recommended)
- Alignment with EU Taxonomy (for EU issuers)

#### 9.2 Sustainability-Linked Instruments

**Key Performance Indicators (KPIs) MUST:**
- Be material to business
- Align with science-based targets
- Include ambitious improvement targets
- Cover all ESG pillars (E, S, G)
- Have independent verification

#### 9.3 Transition Finance

**For hard-to-abate sectors:**
- Credible transition plan required
- Interim targets every 5 years
- Capital expenditure aligned with transition
- Governance oversight of transition
- Just transition considerations

### 10. Conformance Levels (Updated)

**Level 1 - Compliant:**
- All mandatory requirements met
- Annual ESG report with limited assurance
- Basic ESG scoring

**Level 2 - Advanced:**
- Level 1 + reasonable assurance
- Science-based targets set
- ISSB/CSRD full alignment
- ESG-linked compensation

**Level 3 - Leader:**
- Level 2 + nature-positive targets
- 100% living wage achievement
- Real-time ESG dashboard
- Industry leadership in ESG innovation

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## Implementation Timeline

- **Jan 2026:** Large public companies (>€500M revenue)
- **Jan 2027:** Medium companies (>€50M revenue)
- **Jan 2028:** All companies claiming ESG compliance

## Appendices

### Appendix A: Industry-Specific Guidance
*(Separate documents for 11 SASB sectors)*

### Appendix B: ESG Metrics Glossary
*(200+ standardized ESG metrics with calculation methods)*

### Appendix C: Assurance Standards Reference
*(ISAE 3000, ISAE 3410, ISO 14064, etc.)*

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**弘益人間 (Benefit All Humanity)**

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