The UK’s Financial Conduct Authority should take regulatory action over fund mangers’ poor climate voting policies, the national Association of Member-nominated Trustees (AMNT) has said. The body claimed that, while nearly half of UK assets are in pooled investment funds, managers are generally unwilling to accept pension scheme voting policies or disclose their own, making it difficult for scheme trustees to make effective investment decisions. It described the current situation as a “market failure”. A review of 30 fund managers found that only eight would target company directors over a lack of action on climate change, and only Aviva, BlackRock, Federated Hermes and Legal & General Investment Management had voting policies which met AMNT’s standards. Neither ISS nor Glass Lewis have policies which reflect the AMNT’s expectations on climate change, it added.
New Zealand last week passed what ministers described as the world’s first law requiring financial organisations to disclose climate-related risks and opportunities. Starting in 2023, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill will require around 200large financial institutions to provide disclosures. The timing is subject to the publication of TCFD-based climate standards from the country’s accounting standard setter, the External Reporting Board. The UK Government consulted on climate reporting rules for all large companies in May, with a view to introduce regulations by end of this year.
In the US, the Federal Reserve’s Financial Stability Oversight Council has recommended that financial regulators in the country bring in rules on climate data, measurement, disclosure and scenario analysis. It is the first time the watchdog, whose members includes representatives from the Securities and Exchange Commission and the Commodities Futures Trading Commission, has acknowledged climate change as a threat to US financial stability. The Council also recommended the creation of a Climate-related Financial Risk Committee to coordinate regulatory initiatives on climate.
And US company directors and officers could be liable for breaches of fiduciary duty if boards fail to adequately consider climate risks, the Commonwealth Climate and Law Initiative has concluded. The report, which is part of a series looking at different jurisdictions, is based on company law in Delaware, where most large US firms are incorporated. It finds that “directors or officers of a corporation could be exposed to liability for breaches of their fiduciary duties for failures to adequately govern for climate-related risks – in the same way as they could for a failure to adequately govern other material risks to their corporation”.
Europe needs nuclear and gas as “stable sources of energy”, EU Commission President Ursula von der Leyen has said. While acknowledging that the EU needs more renewables, as they are “cheaper, carbon-free and homegrown”, von der Leyen said that the EU also needs a “stable source” of energy, and that it would be pushing forward with its taxonomy proposals. The proposals to include nuclear and transition gas in the taxonomy are highly controversial, with support for nuclear inclusion from France and opposition from Germany and Austria.