Cop28: Info sharing helps regs address global concerns locally

Regulation can be both an impediment but also a driver for change and lawyers can contribute by helping to get the right regulations in place, according to Herbert Smith Freehills partner Heike Schmitz.

We talked to her at Cop28 in Dubai where she said that the type of regulation needed is something that will create a bit of pain in order to drive change, while not being so complicated that it stifles development.

She cited the example of regulations relating to funds and the different approaches of the EU and UK.  

“The EU came out with a framework that was rather technical, that was drafted not so much from an asset management perspective but focused on technical aspects and procedures. The UK looked at that framework and how it was applied in practice and what the problems were. It created its own framework, The Sustainable Disclosure Regime, and made it a much more pragmatic, easier solution, more investment-strategy based, more based on the actual commercial thinking of investors.”

Schmitz said that the EU is now considering copying some of the UK regulation when redoing its own disclosure framework.

“So we see a bit of competition between frameworks, but also a big learning aspect: Policy makers are willing to look across borders at how others have done it.”

However, Schmitz does not believe that a global taxonomy for real estate would work unless it is very generic.

“We’ve seen that as an example with the green bond standards which are often used for investments in real estate, where you have very generic principles of the types of projects you could be financing.”

This does not have the standards with the depth that needs to be applied or the types of procedures that are needed. She said that this could work, but overall it is unlikely to meet the ambition of creating something more pragmatic but which would work for real estate.

“You need to take into account how the built environment is in a place. The taxonomy in the EU has been made to accommodate the building sector in the EU, but it’s very much based on standards, methods, materials being used in the EU. It doesn’t work in that way when it’s being exported to other countries where the building standards are different, where the requirements are different.”

Insulation is less relevant in India, for example, where there is more concern about dealing with excess heat.

“What could potentially work is to have an overarching framework which then can be filled in on a country or region-by-region basis. We have been talking about this for years, and the talking is very important but let’s get to action, as Cop28 says.”