Seven in 10 financial firms say US and EU Environmental, Social and Governance (ESG) rule changes will affect Irish compliance.
A survey by the Compliance Institute found more than half expect the impact to be “moderate”, while one in five expect “significant disruption” as ESG rules diverge globally.
Changes in the US include the Trump Administration exiting the Paris agreement, a reducation of climate regulations, DEI initiatives and sustainable investment rules.
The EU is also planning reforms to simplify sustainability reporting requirements.
Looking at these changes and how they will impact on Irish or US companies based here, it mainly applies to environmental targets.
“In the European context, the first wave of reports have been issued from large listed companies that have to report various standards, quite hefty front end of their financial statements and annual reports,” explained Michael Kavanagh, CEO of the Compliance Institute.
“But as a reaction to the scaling back in the US, we’ve seen the scaling back in Europe for wave two and three, we’ve seen the scope being reduced, we’ve seen the deadlines being postponed for two years, and that scaling back is having an effect,” Mr Kavanagh said.
In Ireland many US companies are also headquartered here, so from a European perspective, the European headquarters are here.
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Speaking on RTÉ’s Morning Ireland, Mr Kavanagh said this means, from a compliance profession’s point of view, many of these companies have their compliance teams headquartered here.
“That (compliance) team has to deal with all these different aspects and rules from jurisdictions, so when you have divergences like that, it just adds to the burden of compliance in what is already a rather heavily trafficked area with various rules and regulations at the moment,” he said.
“The effect on teams is that they have to increase resources, I talked to compliance professionals that literally will be dealing with India this morning, and at about 4pm this afternoon they will be dealing with the US and trying to to navigate the various rules and regulations.”
Mr Kavanagh said the European Commission’s recent move to ease reporting requirements for SMEs is a welcome attempt to balance regulatory demands with practical realities.
However, he added that it also signals that the broader trend toward tougher sustainability expectations will only accelerate.
Despite widespread recognition that ESG regulatory changes will impact Irish compliance, the survey found a concerning lack of action.
Just four in ten financial services firms say they are proactively preparing for shifting ESG frameworks.
Nearly half admit the issue is on their radar but confirm they have yet to take any concrete steps.
