ESG round-up: Directors could face fines for failures on nature-related risks

The latest developments in sustainable finance: SEC pushed to finalise climate rules; PRI, CFA Institute and GSIA launch responsible investment definitions.

Australian company directors who fail to consider nature-related risks could be found liable for breaching their duty of care and diligence, according to a new legal opinion. Commissioned by Pollination Law and the Commonwealth Climate and Law Initiative, the opinion explored the extent to which a director’s duty of care and diligence under section 180 of Australia’s Corporations Act 2001 permits or requires them to consider, disclose and manage nature-related risks arising from dependencies and impacts on nature. The opinion also concluded that directors of companies should at “least identify the company’s nature-related dependencies and impacts, and consider the potential risks this may pose to the company”.

Democrat congresswoman Maxine Waters has urged the US Securities and Exchange Commission to “quickly finalise” its delayed corporate climate disclosure rule, which had been expected in October. The Californian representative and leading Democrat on the House Financial Services Committee made the plea in a letter on Monday. It follows similar calls by fellow Democrats including senator Elizabeth Warren in September. Citing support from investors and “recent developments in California”, Waters also urged the SEC “not to abandon key components of your proposed rule, including requirements to disclose Scope 3 emissions”.

The PRI, CFA Institute and Global Sustainable Investment Alliance have collaborated to launch a series of joint definitions of responsible investment terminology. The three organisations have outlined a definition, detailed explanation, list of other definitions in the market used as inputs, and guidance for using the term across five concepts, including stewardship, impact investing and ESG integration. The trio said that promoting the consistent and precise use of terminology would help to address greenwashing, and that previous definitions have sometimes been specific to investments in listed companies. The updated definitions reflect the reality of responsible investment approaches across asset classes and investment styles, they added.

Frank Bold, WWF and Global Witness are among 19 organisations that have written to members of the European Parliament, Council and Commission calling for effective environmental protections in the upcoming Corporate Sustainability Due Diligence Directive. According to the letter, currently only the parliament’s position of requiring companies to consider the adverse impacts on a series of environmental categories “would be an effective solution to ensure that such harms are identified and addressed”.

More than 300 financial institutions with around $32 trillion in assets have supported the CDP science-based targets 2024 campaign, a 33 percent increase on last year. CDP wrote to a pre-selected sample of more than 2,100 high-impact companies, asking them to commit to and set 1.5C-aligned science-based targets. Investors endorsing the campaign include Amundi, APG Asset Management, Aviva Investors, AXA Investment Managers, DWS Group, ERAFP, LGIM, Nordea Asset Management and PGGM.

SBTi has aligned the definition of SMEs that qualify for its target validation route with the EU’s Corporate Sustainability Reporting Directive SME criteria. The definition will take effect on 1 January. Companies in scope must meet two out of three criteria: less than 250 employees, turnover of less than €40 million, total assets of less than €20 million, and are not in a mandatory forest, land and agriculture sector. Under SBTi’s current definition, an SME has fewer than 500 employees, excluding financial institutions and oil and gas companies. SMEs will in future have two target-setting options of either near-term science-based targets for absolute Scope 1 and 2 emissions for 2030, or a net-zero target for 2050.

Osmosis Investment Management has announced the launch of a total return swaps programme on its Resource Efficient Core Equity Index, after Danish pension fund PKA added $1 billion to the fund with JPMorgan as counterparty. PKA already has $700 million invested in the fund. Osmosis said it was unusual for the swaps, which give investors access to the return of an asset without exposure to it, to be made on non-vanilla indices.

Danish pension fund P+ has completed its oil and gas divestment with the sale of holdings in Eni and Repsol. The fund kept the two in its portfolio due to their net-zero commitments after selling out of the rest of the sector, but put them on its observation list in 2021. However, the two firms were making slow progress and Eni still has plans to expand its Arctic oil production, so both were added to the exclusions list last month.

The 30% Club has launched a Germany Investor Group made up of six members: Allianz Global Investors, Amundi, Candriam, Columbia Threadneedle Investments, LGIM and Sycomore Asset Management. The network will be led by Antje Stobbe, head of stewardship at Allianz Global Investors, and Sabrina Achá Sanz, ESG analyst at Amundi. As of August, women accounted for 39 percent of DAX40 supervisory boards, but only 22 percent of management boards. The group is targeting an increase in the management board figure to 30 percent by 2030.