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Daily ESG Briefing: ‘Enforcement action will focus on only serious misconduct’ says NZ regulator as new climate rules come in

The latest developments in sustainable finance

New Zealand’s Financial Markets Authority (FMA) is currently “scoping [its] regulatory and enforcement approach” to new climate disclosure legislation introduced last month. The rules, the first of their kind in the world, require around 200 ‘Climate Reporting Entities’ to produce annual statements on the impact of climate change on their businesses. In a statement this week, Sarah Vrede, the FMA’s Director of Capital Markets, said that high-level guidance on compliance expectations is slated for next year, with the first batch of climate statements due from April 2024. “Our primary focus as regulator of this regime will be on supporting the development of good practice and – at least initially – enforcement action will focus on only serious misconduct. This would include failure to produce climate statements or where statements are misleading or false”.

Legal & General Investment Management America’s head of sustainability, John Hoeppner, has said that US investors must “think hard” about how they communicate their approach to integrating ESG in their investment objectives. Hoeppner welcomed plans to overhaul recently-introduced rules for pension schemes that made it harder for them to consider ESG issues, but said the new proposals contained “very specific language around being incredibly clear with your investment objectives; where you do have ESG embedded into your investment objective, how do you clarify that?”. Hoeppner said fulfilling the requirements would be a “challenge for all” and contrasted the situation in the US with that of the UK and Europe, where there’s already “tonnes of very formal labelling”.

Swedish pension fund AP3 has been accused of investing in 15 companies on its exclusion list for being involved in nuclear weapons. Local radio programme Ekonomiekot said this week that an investigation shows the public buffer fund, which is obliged under 2019 legislation to take an anti-nuclear position because of Sweden’s commitment to the UN Non-Proliferation Treaty, has SEK1bn in companies linked to the production of nuclear weapons. Ekonomiekot claimed that the country’s other core buffer funds, AP1, AP2 and AP4, have “disposed in their shares” of companies operating in nuclear weapons. 

Austria’s energy and climate minister Leonore Gewessler has said the government is prepared to sue the EU if it moves ahead with plans to include nuclear power in its green taxonomy. The comments were made in an interview with Euractive this week. The EU plans to appease France and 10 other pro-nuclear Member States by introducing the technology into the classification framework, despite concerns over nuclear waste and water usage. Germany, Denmark, Portugal and Luxembourg are also lobbying to keep nuclear out of the taxonomy.

The UK Investment Association has released its latest Principles of Remuneration, which are “designed to give companies clarity on our members’ expectations on executive remuneration”. The body, whose 270 members manage £9.4trn between them, addresses a range of topics including gender pay gaps, executive pay and clawbacks. In the 22-page report, it warns of a “concern that shareholder consultation is being treated as a validation exercise by some Remuneration Committees rather than as a process for obtaining and understanding the views of the company’s major shareholders which can be reflected in the final proposals”. 

Investment advisory specialist Brooks Macdonald has launched a free ‘responsible investment hub’ to encourage advisors and their clients to have “conversations” about sustainable finance. “Advisers note that clients respond well to better storytelling around their portfolios, in a way that demonstrates how their investment is making an impact,” the firm said in a statement today. “The Hub aims to improve engagement from advisers around how they can put capital to work in a way that aligns with the eight sustainability themes of the Brooks Macdonald ‘Advance’ investment strategy”. Those themes include financial inclusion, health & wellbeing, safety, education, waste & water, transport, renewable energy and resource efficiency.