ESG round-up: Cross-party MEP group tables resolution to water down ESRS

The latest developments in sustainable finance: ESRS sector standards expected to be delayed; Very few companies disclose against all TCFD indicators.

A cross-party group of MEPs put forward a resolution in the European Parliament on Wednesday saying the European Sustainability Reporting Standards (ESRS) “cannot enter into force” without significant reductions in the quantity and complexity of the reporting requirements. The motion was tabled by 44 MEPs from European Conservatives and Reformists, the European People’s Party and Renew Europe. The resolution states that the regulation will introduce a “high administrative burden for companies” due to the complexity of the sustainability reporting standards. They added that most ESRS standards “fall short of usable KPIs” and so do not serve the commission’s goal of creating “measurable and comparable standards”.

The European Commission is expected to adopt a proposal next week which will postpone the deadline for adopting the first set of sector-specific European Sustainability Reporting Standards (ESRS) standards by two years. The plans were discussed in an EFRAG sustainability reporting board meeting yesterday (Wednesday), in which the commission’s sustainability reporting team leader Tom Dodd said it was expected that the EC would postpone the implementation from June 2024 to June 2026. The move, he said, would come as part of the commission’s wider plans to reduce the reporting burdens on companies. The commission in March this year told standards body EFRAG to deprioritise its work on sector standards and focus on more guidance around the first set of sector-agnostic ESRS.

Very few companies are disclosing against all 11 of the Taskforce on Climate-related Financial Disclosures (TCFD) indicators. Its sixth and final status report, which covers the 2022 fiscal year, found that while disclosures are increasing, they still fall short of the recommended disclosures. Fifty-eight percent of companies disclosed in line with at least five of the 11 recommended disclosures, but only 4 percent disclosed in line with all 11, showing no improvement on last year’s survey. The International Financial Reporting Standards (IFRS) announced in July that it is due to take over TCFD monitoring from next year, when the International Sustainability Standards Board’s two standards will start to be applied.

Dutch investment giant PGGM voted against four Procter & Gamble (P&G) directors, including chair and CEO Jon Moeller, over changes to the US consumer goods firm’s deforestation policy. The Cincinnati-based company held its annual meeting on Wednesday with all 14 directors being elected. Ahead of the vote, descendants of the founders of the company called on shareholders via a SEC filing to oppose the same four directors over the P&G’s “aggressive and inconsistent communications regarding forest degradation and deforestation in the supply chain”. P&G was recently unveiled as a target of investor engagement group Nature Action 100.

There would have been “many more” key ESG resolutions in this year’s proxy season, if BlackRock, State Street and Vanguard did not vote, according to Morningstar analysis. The research found a group of ESG shareholder proposals, which were “near-miss”, not hitting the 40 percent adjusted support threshold to become key resolutions, but gaining the support of more than 30 percent of independent shareholders. The analysis added that, had the big three not voted their shares, around 30 near-miss resolutions at US large caps in each of the last two years would have been key resolutions.

Gold Standard has submitted programme-level information to the Integrity Council for the Voluntary Carbon Market (ICVM), becoming the first major standard to do so. The submission – currently under assessment to determine its alignment with the Core Carbon Principles – provides details on Gold Standard governance and overarching approaches, including sustainable development provisions, assurance approaches, double counting, and additionality. Gold Standard will decide on which methodologies it will submit to ICVCM once their credit-level approach is further defined.

Robeco has introduced its first carbon offset share classes to encourage investors to contribute to climate solutions beyond reducing financed emissions. The carbon offsetting share classes will be offered for three climate-focused investment strategies, including its Global SDG & Climate Conservative Equities, Climate Global Credits and Net Zero 2050 Climate Equities. Robeco said that, to ensure the quality of the credits, they are only sourced from “reputable partners who perform rigorous due diligence”. The manager added that it also conducts its own due diligence, and uses a specialised rating agency to perform independent third-party quality assessments of carbon projects.

Deutsche Bank has set up a panel of experts to assess nature-related risks. The team includes executives from the German bank, the UN, World Wide Fund for Nature and the Nature Conservancy. Deutsche Bank is looking to increase its understanding of nature-related risks, add those risks into its processes and propose nature-based financing solutions to clients.

Australian listed companies are lagging the US-listed S&P 500 companies on political lobbying disclosures, according to an Australian Centre for Corporate Responsibility (ACCR) report. The benchmark assessed leading Australian energy and resource companies on the Global Standard for Responsible and Climate Lobbying, finding “significant gaps” in company climate lobbying commitments, and their disclosure. No Australian company scored as high as even the average score of US companies, with the majority falling in the bottom 20 percent of performance, compared with most US companies scoring above 60 percent.

Responsible investment funds in New Zealand have overtaken traditional funds for the first time, reaching a record NZD183 billion ($109.7bn; €103.4bn) in 2022, while traditional investments dropped by 9 percent to NZD169 billion, according to a report by the Responsible Investment Association Australasia (RIAA). The benchmark, researched in collaboration with EY, found that the responsible investment market counts for more than half (52 percent) of the total managed funds market in New Zealand. The research also found that stewardship has become the most popular responsible investment approach for fund managers, overtaking negative screening and ESG.

The CFA Institute has launched a second iteration of its DE&I Code for UK investors. Signatories will have to commit to six metrics-based principles, including pipeline, talent acquisition, promotion and retention, leadership, influence and measurement. They will also be required to provide a confidential, annual progress report and will be expected to have an establish senior leader ownership and oversight governance process; public DE&I strategy, policy and commitments; and a DE&I implementation plan. The CFA Institute first launched the code for North American investors, attracting more than 160 financial institutions, representing around $18 trillion in assets under management, including CalPERS, LGIM America and Morgan Stanley. The UK code was developed with the input from a working group chaired by Morningstar’s director of investment stewardship research, Lindsey Stewart.

The Czech and Polish sustainable investment forums (CzechSIF and PolSIF) have joined Eurosif, the pan-European sustainable investment organisation, representing the first two countries from the Central Eastern European (CEE) region to join the forum.