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Daily ESG Briefing: Proposed NY law would require fashion companies to disclose environmental and social impacts

The latest developments in sustainable finance

A proposed New York State bill, unveiled last week, wants to require fashion companies to make a wide range of environmental and social disclosures. The Fashion Act, sponsored by State Senator Alessandra Biaggi and Assemblywoman Anna R. Kelles, would force global fashion companies with more than $100m in revenues, doing business in New York, to map a minimum of half of their supply chain, starting with the farms where their raw materials originate, as well as factories and shipping. They would also be required to map where in the supply chain they have the greatest social and environmental impact when it comes to fair wages, energy, greenhouse gas emissions, water and chemical management, and make concrete plans to reduce those numbers. Companies would have 12 months to comply with the mapping directive and could be fined up to 2 percent of their annual revenues if they do not comply. The bill will now make its way through Senate and Assembly committees, with the sponsors aiming to bring it to a vote in late spring.  

In order for transition investing to "gain broad acceptance", KPIs need to be developed for reporting engagement outcomes to provide better evidence to end-investors that companies lagging from an ESG perspective are being held to account, said ESG researchers at Barclays in a recent special report on the top ESG themes for 2022. The researchers say this year will see more focus on the impact of investor engagement, adding they hope more asset managers reporting on real engagement outcomes in a quantitative manner, rather than through case studies. Barclays sees the sustainability-linked bond market as a “prime candidate for better dialogue” between investors and issuers, and also predict management compensation to be a key theme for engagement in 2022.  

French central bank Banque de France has found 42% of the value of the securities portfolio held by French financial institutions corresponds to securities issued by companies that are highly or very highly dependent on at least one ecosystem service.  Companies are particularly dependent on the ecosystem services related to water supply (surface and groundwater) but also on certain regulatory services (erosion control, protection against floods, climate regulation), said the central bank is its first analysis of biodiversity loss and financial stability.  

Energy prices could continue to rise for consumers in the transition period shifting towards cheaper and less carbon-intensive fuels Isabel Schnabel, an executive board member of the European Central Bank, has warned. Speaking at the American Finance Association 2022 Virtual Annual Meeting. Schnabel argued that if this is the case governments need to protect vulnerable members of society from energy poverty and that central banks should assess “whether the green transition poses risks to price stability and to which extent deviations from their inflation target due to a rise in the contribution from energy to headline inflation are tolerable and consistent with their price stability mandates.”