ESG round-up: California governor Newsom signs climate disclosure bill

The latest developments in sustainable finance: EP adopts green bond standard; Mirova expands gender fund to cover broader DE&I.

California governor Gavin Newsom has signed Senate Bill 253 that will require companies with more than $1 billion of annual revenues and operating in California to disclose their Scope 1, 2 and 3 emissions. In a statement he said that the policy demonstrates California’s “continued leadership and bold responses to the climate crisis, turning information transparency into climate action”. However, he added that the implementation deadlines in the bill were “likely infeasible”, which could result in inconsistent reporting, so has directed his administration to work on the bill to address these issues.

MEPs have adopted the EU green bond standard. The regulation, adopted by 418 votes in favour, 79 against and 72 abstentions, puts forward uniform standards for issuers who wish to use the designation “European green bond” in their marketing. Companies choosing to adopt the voluntary standard will be required to disclose considerable information about how the bond’s proceeds will be used. They will also need to show how these investments feed into the company’s transition plans. The standard will be aligned with the EU taxonomy, but there is some flexibility until the taxonomy framework is fully up and running.

Mirova is renaming its Women Leaders Equity fund the Women Leaders and Diversity Equity fund, to reflect a shift away from ESG themes in its investable universe, to a focus on sustainable investments. The fund will retain its Article 9 status under the proposed changes and will continue to be led by lead manager Soliane Varlet. Since its launch four years ago, the fund has accrued €223 million in assets.

The European Securities and Markets Authority (ESMA) has said it cannot confirm the existence of a “systematic and consistent pricing advantage for any ESG bond category” and that issuers’ public sustainability commitments do not impact the pricing of their bonds. In a study covering 888 ESG-labelled bonds, ESMA researchers said they were unable to find a systematic greenium for any label type, but that issuers had previously benefited from yield discounts in the past.

Varma has become the third pension fund to have its emission reduction goals approved by the Science Based Targets initiative (SBTi). Varma is targeting a 60 percent reduction in Scope 1 and 2 emissions by 60 percent by 2030, compared with its 2021 levels. On Scope 3, the pension fund has set a target for its listed equities, corporate bonds and real estate funds to increase the share of companies committed to the SBTi to 51 percent by 2027. In 2021, a total of 28 percent of Varma’s investees had set science-based targets, it said.

US proxy giant Glass Lewis has introduced a suite of stewardship solutions designed for investment managers and pension funds. The new product will enable investors to consider their engagement needs, with the possibility to either track your own programme, or to use Glass Lewis’s customised service to manage engagement campaigns on the firm’s behalf.

The Bank of International Settlements’ (BIS) Basel Committee on Banking Supervision (BCBS) has said it will consult on a Pillar 3 disclosure framework for bank exposures to climate-related financial risks. The committee said it will publish a consultation paper on the proposed framework by November.

The Australian Institute of Company Directors (AICD) has published a director’s guide on mandatory climate reporting. The guidance outlines the proposed Australian mandatory reporting framework, sets out key legal obligations for directors and provides practical steps directors can take to prepare for climate reporting.

The Institutional Investor Group on Climate Change (IIGCC) CEO Stephanie Pfeifer has written an open letter to the COP28 presidency calling for “ambitious outcomes” at this year’s conference. The letter has highlighted three areas of focus including the phasing out of fossil fuels and speeding up global decarbonisation efforts, building resilience and reducing vulnerability, and scaling up, accelerating and aligning finance for climate action.

CCLA’s 2023 corporate Mental Health Benchmark: Global 100+ has found a continued lack of CEO advocacy on mental health, with just 19 firms publishing evidence of a CEO statement promoting workplace mental health. The benchmark, which assessed 110 of the world’s largest listed companies regarding performance on workplace mental health, also found that only 22 percent of companies report on providing mental health training to line managers. On a more positive note, however, it found that almost one in five companies have improved their management and disclosure on mental health since 2022, “indicating that mental health is rising up the business agenda”.

The Finance for Biodiversity (FfB) Foundation has issued a biodiversity-climate nexus guide for financial institutions. The guide has been written by members of a subgroup of the FfB Foundation’s impact assessment working group for bankers, insurers, asset managers and asset owners. The guide’s five key recommendations include identifying and prioritising sectors with a high impact on biodiversity and climate; integrating biodiversity into climate targets, policy and reporting; engaging with companies on nexus topics by leveraging existing frameworks; setting up sector policies; and financing solutions for the biodiversity and climate nexus.

ESG and sustainable finance has remained the highest scoring metric for regulatory impact in KPMG’s annual regulatory barometer. The score comes in light of expanding and increasingly demanding disclosure requirements, regulatory scrutiny on greenwashing and intensifying supervisory expectations.