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Daily ESG Briefing: Hong Kong to introduce “mandatory” TCFD-aligned disclosure

The latest developments in sustainable finance

Hong Kong will introduce “mandatory” TCFD-aligned climate-related disclosures “across relevant sectors” by 2025, as part of a five-point sustainable finance strategy, which was announced last week by the country’s central bank-initiated Green and Sustainable Finance Cross-Agency Steering Group. The steering group of regulators, which was established in May by the Hong Kong Monetary Authority (HKMA) along with the Securities and Futures Commission (SFC), also stated that it would "take active steps to enhance climate-related disclosures of financial institutions including banks, asset managers, insurance companies and pension trustees, and increase the coverage of mandatory disclosure as soon as practicable".

Bankers for Zero, an initiative coordinating the UK banking sector’s response in the lead up to COP26, has released a proposed framework for lenders’ climate commitments. The framework will “push banks to actively engage with their business customers' pathway to net zero”, the initiative said. The framework asks banks to set a date to end fossil fuel financing and set a trajectory for decarbonisation, among others.

BP, Eni, Equinor, Galp, Occidental, Repsol, Royal Dutch Shell and Total have developed and agreed to apply six Energy Transition Principles in order to play their part in the energy transition. The commitments focus on: publicly supporting the goals of the Paris Agreement, industry decarbonisation, energy system collaboration, development of carbon sinks, and transparency. The move was welcomed by the investment initiative Climate Action 100+. Adam Matthews, Chair of the Climate Action 100+ European Investor Working Group on a Net Zero Standard, called it “an important foundational commitment”. 

BlackRock (iShares), Vanguard, State Street Global Advisors, MSCI, FTSE Russell, S&P Dow Jones and Bloomberg have disproportionate power to mitigate deforestation risk (as well as other natural capital risks) in the Exchange Traded Funds (ETFs) market, according to analysis by Planet Tracker. 

Amazon has had ten shareholder proposals, relating to risks across the ESG spectrum, filed by a series of institutional investors – many of whom are members of the Interfaith Center on Corporate Responsibility. The themes range from workers on boards, civil rights and facial recognition technology. “Amazon has developed a reputation for running workers ragged, leaving hourly associates – disproportionately people of color – overworked and underpaid,” said Sarah Zoen of Oxfam America, who led a filing, along with the Rhode Island and Vermont State Treasurers, requesting that the company appoint an hourly worker to the board. 

Dutch investor NN Investment Partners (NNIP) has predicted a bumper year for global green bond issuance in 2021. NNIP said it expected the global green bond market to grow by €300bn in 2021 to  €1trn, buoyed by the forthcoming release of the EU’s Green Bond Standard and a planned issuance of €225bn worth of green bonds from the EU.

Amundi, the €1.7trn French manager, has reportedly offloaded green bonds from the State Bank of India (SBI) over the bank’s financing of a controversial Australian coal mine owned by Indian company Adani. In November, the manager had warned that it would remove the lender’s green bond from the Amundi Planet Emerging Green One fund if SBI proceeded with the transaction.

A draft regulation in Peru is proposing a change to fiduciary duties that would require fund managers of pension plans to incorporate ESG into their investment decision-making. The regulation could be in place by April 2021. Peru’s banking, insurance and pensions regulator (Superintendencia de Banca, Seguros y AFP) has run a consultation on the subject. See the response by the Principles for Responsible Investment here.

Europe’s banking regulator has stated investment firms’ remuneration policies should take heed of ESG “risk factors”. The EBA made the statement in a consultation document published last week on remuneration policies under the Investment Firms Directive (IFD). The consultation closes in March.

Malaysia’s CIMB has announced that it will cease financing coal by 2040, the first banking group from Southeast Asia to do so. The bank’s new  climate policy bans financing of new thermal coal mines and coal-fired power plants, although it will continue to honour existing commitments. The policy comes into force next year.

Former ExxonMobil CEO Lee Raymond, has reportedly resigned from the board of JP Morgan Chase. Raymond, who has been a board member at US banking heavyweight for 33 years, was the target of a shareholder campaign led by New York City’s Comptroller, Scott Stringer this year, which sought to remove the octogenarian over his close links to the fossil fuel industry.

Switzerland’s central bank has announced it will  “exclude all companies primarily active in the mining of coal from our portfolios”. Chairman Thomas Jordan said that Swiss National Bank has expanded its exclusion policy as it increasingly takes “climate-related issues into consideration”.

Australia: 26.3% of investors backed a shareholder resolution at National Australia Bank (NAB), calling on the Australian banking group to reduce its exposure to the coal, oil and gas sectors in line with the Paris climate goals. This is a doubling of last year’s result (12.9%) and mirrors the success of a similar proposal at its rival ANZ bank. Among the supporters of both proposals was investment behemoth Blackrock, which, interestingly, in the case of NAB said that it was supporting the proposal not out of “dissatisfaction” with the bank’s performance on climate change, but “rather to encourage NAB to continue to demonstrate leadership”.