ESG round-up: Defence giants sign up to UK ESG charter

The latest developments in sustainable finance: MEPs vote to delay the adoption of ESRS sector standards; DWS faces ongoing inquiries from Frankfurt public prosecutor.

Seven of Europe’s largest defence firms including Airbus and BAE Systems have signed up to a UK Defence ESG Charter alongside industry body ADS. Under the charter, the firms commit to nine ESG “statements of intent”, including on the traceability of critical minerals, carefully assessing the risks of existing and potential customers, and working to improve DE&I and representation across all levels of the workforce. The ADS said it expected “many more companies” throughout the defence supply chain to join the charter in the coming months. The UK’s minister for defence procurement James Cartlidge urged firms to sign up to it.

MEPs in the European Parliament’s legal affairs committee have voted in favour of delaying the adoption of the European Sustainability Reporting Standards sector standards by two years until June 2026. There were 21 votes in favour of the European Commission proposal, two against and no abstentions. A press statement following the vote said the MEPs also suggested that the commission should publish eight of the reporting standards as soon as they are ready – before the deadline – to improve “transparency and flexibility”. Following plenary approval, the parliament will be ready to start negotiations about the final shape of the legislation with EU governments.

DWS made further information available to the Frankfurt public prosecutor this month in response to ongoing inquiries into alleged greenwashing, a spokesperson for the manager has confirmed to Responsible Investor. Officials visited DWS’s offices on 16 January as part of the investigation. The German asset manager was first raided by the police over greenwashing allegations in May 2022. Last year, it also settled with the US Securities and Exchange Commission for $19 million over greenwashing claims.

A spokesperson for DWS said: “We have co-operated openly and transparently with all authorities in Germany and abroad from the very beginning of their investigations. We have reviewed and shared a total of around three million documents, both on request and proactively. We will continue to co-operate fully to come to a resolution of this investigation as quickly as possible but are dependent on the timing of the prosecutor’s office.”

The UK Treasury has extended the Transition Plan Taskforce’s mandate to 31 July, with a possible further three-month extension to the end of October to support the Transition Finance Market Review, initiated at the end of last year. The TPT was launched in April 2022 with a two-year mandate to deliver the “gold standard” for transition plans. It is close to completion on the tasks listed in its terms of reference, including the publication of the TPT Disclosure Framework with implementation and draft sector guidance.

The Italian Ministry of Finance is expected to release a draft legislative decree transposing the EU’s Corporate Sustainability Reporting Directive into national law in the next few weeks. All member states are required to transpose the directive into law and bring into force the necessary regulatory and administrative provisions by July 2024.

French banking and insurance prudential regulator ACPR has assessed the content of several insurers’ and pension funds’ climate and biodiversity reports as “very heterogenous”. In its analysis of the reporting under France’s climate (Article 173) and biodiversity (Article 29) laws, it said none of the reports met all the requirements in terms of completeness, accuracy or precision. The regulator also noted that a significant number of organisations did not meet the deadline for submitting their reports, due to a “misunderstanding or ignorance” of the regulation.

Global ESG funds saw negative flows for the first time in Q4 last year, with investors withdrawing $2.5 billion, according to Morningstar research. In Europe, sustainable funds held up better than the broader market, receiving $3.3 billion of net new money in the fourth quarter, thanks to passive funds, which collected $21.3 billion. However, actively managed sustainable funds lost close to $18 billion. Investors pulled a record $5 billion from US sustainable funds in the last quarter, for a total of $13 billion over 2023.

Article 8 funds saw the largest quarterly outflows, according to Morningstar, with investors pulling €26.7 billion in Q4. As in the two previous quarters, funds with no commitment to sustainable investments saw the largest outflows at €17 billion, representing two-thirds of total Article 8 outflows in the quarter.

The Monetary Authority of Singapore has launched the Singapore Sustainable Finance Association to support the state’s transition to a low-carbon economy. Speaking at the launch on Wednesday, MAS managing director Chia Der Jiun said the SSFA will focus on carbon markets, transition finance, blended finance, natural capital and biodiversity, and the taxonomy in its first year.

HSBC has published its first net-zero transition plan as part of its 2050 net-zero target. The bank is looking to set on-balance sheet financed emissions targets for 2030 for key carbon-intensive sectors and aiming to provide between $750 billion and $1 trillion in sustainable finance and investment by 2030.

The Network for Greening the Financial System has released a technical document on the purposes and practical applications of its scenarios. The document stresses the need for users to clarify what they intend to achieve and consider how the scenarios they use will support them in meeting their objectives.

Swiss and Spanish stock exchange operator SIX has launched a new climate data platform to support the reporting and monitoring of climate-related data. The climate data offering from SIX brings together multiple data sets on regulatory, historical and forward-looking climate impacts data providers, including MSCI, Inrate and CDP.