ESG round-up: EFRAG urged to continue work on ESRS sector standards

The latest developments in sustainable finance: ING faces climate lawsuit; P+ divests 10 Chinese companies on human rights grounds.

A group of business and finance institutions – including AkademikerPension, the Church Pension Fund Finland, Triodos Bank and Eurosif – have written to EFRAG to “stress the importance” of continuing to work on sector-specific European Sustainability Reporting Standards (ESRS). The letter said the standards are “essential to clarify the requirements and expectations for companies’ disclosures based on their industry, facilitate the reporting exercise and reduce costs”. It comes head of a meeting on Wednesday when the European Parliament’s legal affairs committee is expected to discuss a proposal by the European Commission to postpone the adoption of sector standards by two years until June 2026.

Staying with EFRAG, the standard setter has launched a public consultation on two exposure drafts on sustainability reporting standards for SMEs. One of the papers covers listed SMEs, while the other addresses non-listed SMEs. The consultation will close on 21 May.

Friends of the Earth Netherlands has filed a climate lawsuit against ING asking the Dutch banking group to align its climate policy with 1.5C and reduce its CO2 emissions by at least 48 percent by 2030 (compared to 2019). Responding to the lawsuit, a spokesperson for ING said: “We are confident that we take impactful action to fight climate change and sustainability is part of our overall strategic direction.” They added that ING “aims to play [its] part in the social and low-carbon transformation”, and that its approach is based on science and is adapted as science evolves. The spokesperson said the bank would respond to the court if necessary.

Danish academic pension fund P+ has exited 10 Chinese solar companies over human rights concerns. In a blog post published last week, head of responsible investments Kirstine Lund Christiansen wrote that the pension fund had divested companies it believed “are closely connected to the problems in Xinjiang”. She added that a further 10 companies that are exposed via their supply chains have been placed under “heightened observation and active ownership”.

Meanwhile, the Investor Alliance for Human Rights has released guidance on respecting rights in renewable energy to “mitigate Uyghur forced labour risks in the renewable energy sector”.

French public pension fund ERAFP has published its first fossil fuel policy, reinforcing its commitments to reduce greenhouse gas emissions from its investment portfolios and covering thermal coal, unconventional hydrocarbons and conventional hydrocarbons. The policy includes a planned exit from thermal coal by 2030 in OECD countries, and by 2040 globally, and halting investments in companies developing new thermal coal assets.

BlackRock has announced its engagement priorities for 2024. The list comprises: board quality and effectiveness; strategy, purpose and financial resilience; incentives aligned with financial value creation; climate and natural capital; and company impacts on people. The firm’s investment stewardship team also endorsed the International Sustainability Standards Board’s (ISSB) standards (IFRS S1 and S2), and noted that initiatives such as the Taskforce on Nature-related Financial Disclosures (TNFD) provide frameworks “that may prove useful to guide disclosure on material, nature-related impacts and dependencies”.

Linklaters has predicted that there is “no reprieve in sight” for ESG litigation and greenwashing scrutiny. The law firm said greenwashing will remain a high priority for regulators and activists in 2024, governments will remain at risk of being challenged over climate action (or inaction), and several “significant” cases will continue through the US, EU and UK courts. Increasing sustainability disclosures required under regulatory regimes such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulation (SFDR) could also give rise to increased litigation, it added.

The Financial Reporting Council (FRC) has published the final revision of the UK corporate governance code. As indicated in November, the regulator has dropped proposals for revisions to the code related to the role of audit committees on ESG issues, expanding DE&I expectations, over-boarding provisions and expectations on committee chairs’ engagement with shareholders.

The Ontario Teachers’ Pension Plan board has updated its proxy voting guidelines. Additions include heightened expectations of audit committees, including climate literacy as a core competency, and a demand for climate-related impact to be evaluated when reviewing budgets, performance and M&A activity.

The Principles for Responsible Investment (PRI) is seeking consultancy proposals for a project relating to its work on collaborative sovereign engagement and climate change. The successful contractor will conduct a review of the first 18 months of the PRI’s pilot engagement focused on the Australian system and put forward lessons and recommendations for any expanded programme. The project will start on 15 February, and final material will be due on 31 March. The deadline for submissions is 7 February.

Goldman Sachs Asset Management has relaunched its global energy equity fund as the Global Environmental Transitional Fund. The Article 8 strategy will target companies which are transitioning to a lower environmental footprint.

The French SIF has published its annual ESG survey for France’s largest 40 listed companies (CAC40). This is the fourth year the FIR has run the survey, which addresses topics including the energy transition, executive remuneration, engagement and lobbying.

The Global Reporting Initiative and IFRS Foundation have published a new analysis and mapping resource, illustrating the areas of interoperability a company should consider when measuring and disclosing Scope 1, 2 and 3 emissions in accordance with both the GRI’s standard and IFRS S2.