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As with any industry where advancement and innovation are outpacing regulation, the complex landscape can be difficult for businesses to navigate their operations. From adapting to new realities in emerging industries such as the metaverse and fintech, to compliance and commitment to environmental, social, and governance (ESG), it is of great importance for businesses to keep updated of key trends and developments in order to remain internationally competitive.
Here are several key highlights:
- ESG - Green Finance Industry Taskforce launched its third consultation on the green and transition taxonomy, while ISSB standards are set to launch in June 2023 and to take effect in 2024.
- Metaverse - The Japan Metaverse Economic Zone, as dominated largely by financial firms, will allow interoperability between different metaverse services and platforms available to consumers.
- Digital assets - Ethereum network’s Sepolia testnet has successfully upgraded, simulating the scheduled hard fork. The Shanghai hard fork is expected to go live in April.
- Emerging regulatory trends - Regulators are taking operational resilience enforcement seriously. The event to which the fines relate happened in 2018 despite the rules came into force in 2022.
Feel free to explore the topics below and we welcome any opportunity to discuss more on any of the topics with our respective PwC representatives.
Main drivers
Environmental, Social and Governance (ESG)
We continue to see good momentum and progress across the ESG landscape so far in 2023. Notably, efforts to standardise sustainability disclosures have ramped up as the International Sustainability Standards Board (ISSB) announced that the global sustainability standards will be launched in June. Meanwhile in Singapore, the Green Finance Industry Taskforce (GFIT) launched its third consultation on the green and transition taxonomy and expects to have the taxonomy finalised by 1H23.
Regulations and standards
Green Finance Industry Taskforce (GFIT” launches third consultation on green and transition taxonomy
The final public consultation on a green and transition taxonomy for Singapore-based financial institutions seeks views on the detailed thresholds and criteria for the classification of green and transition activities in several sectors.
Global sustainability disclosure standards for companies set to take effect in 2024
According to the International Sustainability Standards Board (ISSB), the rules will be issued by the end of June. The ISSB also affirmed the drafting of the two standards as final rules.
Loan Market Association updates Green, Social, and Sustainability-Linked Loan Principles
The guidance will cover recent market developments across sustainable finance markets, and alignment of frameworks to promote development and integrity of finance products.
UK accounting regulator to ramp focus on key ESG disclosure areas
A guidance will be set out on best practices for the distribution and consumption of ESG data, and examining companies’ materiality processes to enhance stakeholders with relevant and decision-useful information.
The US Securities and Exchange Commission to examine investment advisors, funds on ESG investing practices
The examinations will focus on ESG-related advisory services and fund offerings, assessment of fund disclosures and labelling of ESG products.
Industry update
Asset management
AXA Investment Managers ties executive compensation to climate goals
The compensation policy will apply to approximately 400 senior executives at the firm, and focus primarily on portfolio decarbonisation.
JP Morgan invests $500 million in commercial timberland, highlighting carbon market opportunity
The transaction follows the acquisition by JP Morgan in 2021 of timberland investor Campbell Global as J.P. Morgan Asset Management expects to become an active participant in carbon offset markets.
Allianz Global Investors (AllianzGI) votes against companies that don’t link executive pay to ESG performance
The investment manager warned that it will begin this year to vote against directors of large-cap European companies that fail to integrate ESG performance metrics into executive pay policies.
Banking and capital markets
Investors urge European banks to follow HSBC on ending new oil and gas financing
A group of 30 investors representing more than $1.5 trillion in AUM has sent letters to the CEOs Europe’s largest banks, to end financing for new oil and gas fields this year.
DBS joins China green lending programme
Under the programme, the low cost funding to DBS bank and other financial institutions would enable them to offer low-interest loans for sustainable development projects.
BNP Paribas sued over fossil fuel financing
French NGOs launched a lawsuit against BNP Paribas to force the bank to implement an effective climate policy and to immediately stop supporting the development of fossil fuels.
Insurance
AXIS Capital commits to emissions reduction
AXIS Capital Holdings has announced a commitment to a 50% absolute reduction of Scope 1 and 2 greenhouse gas (GHG) emissions by 2030 across its operations.
Ping An launches policy protecting marine environment
Ping An, the largest insurer in Asia, has launched its first ocean carbon sink index insurance policy. The policy is part of an initiative to help protect marine ecological systems.
ESG platforms, solutions and tools
MSCI ESG research launches tool for companies to analyse their sustainability strategy against peers
The tool gives executives at companies the ability to measure and compare their ESG and climate data versus peers, while also identifying potential disclosure gaps.
ERM, Salesforce Partner to offer decarbonisation solutions and services
As a global tier one partner, ERM will provide end-to-end decarbonisation services across the client lifecycle utilising Salesforce’s sustainability management solution, Net Zero Cloud.
Interesting reads
EU rules that France can use nuclear energy to make "green" hydrogen
The European Parliament has ruled that hydrogen made with France's nuclear-powered electric grid will be classified as "low carbon”.
Biodiversity loss poses a fundamental risk to the global economy
In an ongoing effort to slow the destruction of nature, delegates at the 2022, COP15, Canada, focused on reversing the rapid decline of animals, plants and insects.
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Metaverse
Much of the recent metaverse buzz has been centred around future iterations of technologies as new AI tools such as DALL-E and ChatGPT become available to the public, offering more bespoke solutions for scalability and automation solutions. As both tools are still in their infancy phase, it remains to see what opportunities lies ahead and how new creations can be embedded into existing environments and experiences.
Industry update
Financial services
Dubai International Financial Centre launches new metaverse platform
This initiative aims to develop a creator community and promote venture building; address policy development and legislation on open data; digital identity and law frameworks; and explore ways to enhance customer experiences in the metaverse.
AXA France enters The Sandbox metaverse
The multinational insurer has made its foray with "Axadia" in The Sandbox metaverse, which will allow visitors to learn about AXA's aims and values through missions and games.
MUFG, SMBC, Fujitsu in web3 metaverse interoperability consortium
The aim of the alliance is to create a new social infrastructure for enterprise digital transformation, for interoperability between different metaverse services and platforms for Japan consumers.
Strategic alliances
Huawei to launch metaverse and Web3 Alliance for East Asia and beyond
The firm has entered into a heavyweight partnership with multiple blockchain companies to facilitate the speedy adoption and proliferation of Web3 solutions.
Metaverse developer LandVault partners with Singapore’s Enjinstarter for Southeast Asia expansion
The partnership will seek to revolutionise brand-customer relationships, grow operations to help organizations plan and fulfil their metaverse ambitions.
Development and build
Tencent to offer metaverse-building services for Asian markets
The firm will offer its metaverse-in-a-box services to build and design metaverse spaces for key industries, and will work alongside with industry partners to create immersive experiences and nurture a better Web3 ecosystem.
Morpheus launches Turnkey VR enterprise solution
The VR engagement platform will roll out services across Fortune 2000 firms for companies seeking to cultivate a healthy corporate culture through creation of virtual spaces and roadmap development to future proof their business.
Investments
Hong Kong government allocates $6M to boost future metaverse plans
The funds will be channelled to metaverse related business corporations and events, including a newly set task force featuring industry members and regulatory bodies to further push virtual asset development.
South Korea's Ministry of Science and ICT commits $173 million to metaverse development in 2023
The investment will see metaverse specialized facilities such as platform and technology development, and talent cultivation, to promote and support educational and customer-facing projects.
Key regulatory developments
World Government Summit launches ‘Governing the Metaverse’ report on vast Web3 potential
The report covers key governance issues of virtual spaces from safety to incentivisation, and focuses on the evolution of the Metaverse as it continues to be defined and shaped.
Dubai’s cryptocurrency regulator, the Virtual Assets Regulatory Authority issues new rules for virtual assets which could be in favour of the metaverse
The regulations cover seven broad virtual asset activities, from lending and borrowing services to management and investment services to enhance investor confidence and market development in the country.
Interesting reads
ChatGPT’s vision for the future of metaverse
It is crucial to keep in mind the potential of the future and how developing technologies might be leveraged to enhance and modify such experiences as the metaverse continues to develop.
Colombia hosts first virtual court hearing in Metaverse with Meta’s technology
The two-hour hearing saw lawyers on virtual headsets and participate in the meeting as computer-generated avatars to expedite judicial proceedings, marking a significant landmark moment in virtual reality technology.
How the metaverse will ease banks’ compliance woes
While the metaverse will entail substantial investments, the benefits make it worthwhile. The article discusses three key advantages and how the adoption of the metaverse can help to improve regulatory compliance.
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Digital assets
Following the crypto contagion caused by the fallout of FTX, regulators are stepping up their efforts to introduce safeguards to the ecosystem.
Industry update
General market
Ethereum testnet successfully forks in Shanghai upgrade rehearsal
Success in the launch of Shapella upgrade allows developers to implement it on the Goerli testnet next month in April 2023.
CBDC
Digital yuan gets smart contract functionality
China’s central bank digital currency has seen new use cases in recent days, including buying securities and making offline payments. Users can also make contactless, offline payments via phone.
Trading services
Indonesia targets mid-2023 for its state-backed crypto exchange
The plan to establish a state-backed crypto exchange comes as digital asset industry remains rife with scams and fraud. The exchange will be run by a private-sector company.
Financial sector
Cryptocurrency bank Silvergate downgraded by JPMorgan
Silvergate Capital was downgraded from “neutral” to “underweight” by JPMorgan after the crypto bank said that it was evaluating its ability to continue as a going concern.
Funding
Singapore's Blockchain Founders Fund raises $75M to encourage Web3 mass adoption
The fund will focus on supporting high potential early-stage, pre-seed and seed projects that encourage the mass adoption of Web3 and blockchain technology.
NFT
NFT marketplace Blur overtakes OpenSea as Ethereum NFT trading skyrockets
The platform saw transactions of over $500 million worth of Ethereum NFT being traded as Blur’s rewards model catapults it over OpenSea.
Key regulatory developments
G20 to establish standards for global crypto regulatory framework
This supports a comprehensive policy approach to crypto-assets, by considering macroeconomic and regulatory perspectives, including the full range of risks posed by crypto assets.
EU publishes text for Basel III crypto rules for banks
The EU Parliament voted on legislation that includes plans to implement the Basel Committee rules for banks and crypto-assets, which imposes capital and liquidity requirements.
Interesting reads
Beijing quietly backing Hong Kong’s crypto ambitions
Its reported that officials from mainland China makes visits to Hong Kong for crypto developments. It seems Beijing looks to keep Hong Kong as a testing ground for digital assets.
ChatGPT's potential to revolutionise crypto market
ChatGPT can be used to examine market data, forecast potential trends and highlight trading opportunities. Also, to create automated trading algorithms and guide decision making.
Contact us
Wong Wanyi
Emerging regulatory trends
Despite the increases in cost for compliance, it is more costly not to meet compliance obligations. The costs of non-compliance extend beyond fines, often associated with business disruption, reputational damage and remediation costs, among others. A continuous enhancement of the compliance programme is therefore important to achieve a more sustainable outcome.
Compliance risk assessment
Global anti-money laundering ("AML") fines surge 50% in 2022
Financial institutions were fined approximately $5bn for AML infractions, breaching sanctions and failings in KYC systems, not including costly remediation costs and reputational damage.
Bank of America racked up $1.2bn in penalties, settlements in 2022
A total of $1.2bn was incurred for litigation and regulatory investigations related expenses in 2022, including fines and settlements, according to the company filing.
UK's TSB Bank fined £48.65mn for operational resilience failings
The operational resilience failings highlighted the importance of vendor management, business continuity planning and operational risk management in digital transformation project.
Anti-money laundering trends and challenges
Application of Artificial Intelligence in KYC and AML
AI-powered robots are able to rapidly screen massive amounts of information and find links between globally distributed information sources.
Fake people, real threat: Banks scramble to strengthen digital verification
Synthetic identity fraud, in which a real person's information is stolen and combined with other falsified personal information to create a new identity, is a growing problem.
Key regulatory developments
Jurisdictions under increased monitoring by FATF - 24 February 2023
South Africa and Nigeria are the new countries added to the "grey list" in 2023, while Cambodia and Morocco are no longer subject to increased monitoring by the FATF.
Our leadership team
Alywin Teh
Justin Ong
Kwok Wui San
Paul Pak
Asset and Wealth Managed Services - Risk and Compliance Solutions Leader, Singapore, PwC Singapore
+65 9622 4233
Yura Mahindroo
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