ESG round-up: EU delays verdict on forestry and agriculture taxonomy criteria

NZAOA chair calls for government support of MDB, DFI reforms; ISSB to prioritise climate-related disclosures.

The European Commission (EC) has not included technical criteria for the forestry, agriculture and fishing sectors in draft rules for the taxonomy’s remaining four objectives published on Wednesday, pending “further assessment and calibration”. The EC’s taxonomy advisers suggested a set of criteria for the sectors in October but received criticism from EU industry representatives who argued that a “one size fits all” approach was unsuited to regional forest diversity. The EC’s draft separately shows that certain aviation-related activities, such as green retrofits and sustainable fuel certification, will be eligible under the taxonomy’s climate mitigation objective. The publication of the draft rules launches a month-long consultation period, after which the EC is expected to push for adoption by the end of June.

The International Sustainability Standards Board (ISSB) has announced relief for companies getting to grips with the two global sustainability standards it approved in February, with a prioritisation of climate-related disclosures. Announced on Tuesday, the package of relief will mean companies will not be expected to “provide disclosures about sustainability-related risks and opportunities beyond climate-related information” in the first year. In addition, they will not be required to disclose Scope 3 greenhouse gas emissions. Next month, the ISSB is planning to consult on its efforts around biodiversity, human capital, human rights and integration in reporting.

MSCI has partly reversed an earlier decision to exclude synthetic ETFs – which do not physically hold the securities listed in their portfolios – from its ESG funds ratings coverage. The data provider said it would give asset managers six months to provide the constituent data of the portfolio which is being replicated before removing a fund from coverage. It declined to give details of affected funds but Morningstar analysis suggests there are around 21 synthetic ESG funds in Europe, and synthetic funds are less common in other markets. MSCI will also no longer consider momentum in its fund ESG ratings, or the “adjustment factor”, which boosts fund-level ratings based on exposure to companies with rising individual ESG ratings. The changes will result in downgrades of up to 73 percent of funds in MSCI’s coverage, including ETFs, mutual funds and index funds.

Günther Thallinger, chair of the Net Zero Asset Owner Alliance’s steering group, has written to G7 finance ministers on behalf of the alliance calling on them to support reforms to multilateral development banks and development finance institutions. Ahead of the spring meetings of the IMF and World Bank Group, Thallinger listed three requests: for institutions to be incentivised to make private capital mobilisation for net zero a core focus through target-setting and ambitious KPIs; the adjustment of risk frameworks to increase undersupplied financing such as equity and local currency financing, as well as enhancing guarantee provision; and steering institutions to focus on collective solutions involving both governments and the private sector.

SEB Investment Management has updated its exclusions policies to include new biodiversity criteria as part of an overhaul of its sustainability policy. The SEK684 billion ($66 billion; €60 billion) manager will now exclude companies which have a negative impact on endangered species or particularly sensitive areas. In other areas, it has announced plans to ditch companies with “sub-standard” corporate governance structures from its Article 8 and 9 funds, and has adopted a net zero by 2040 target for assets under management.

Rio Tinto will disclose the policy settings required to support its Scope 1 and 2 targets following engagement with investors and civil society. The miner said it would publish briefing papers on specific assets and emission sources “detailing how the right policy settings can support its emissions targets”, as well as decarbonising the value chain. The Australasian Centre for Corporate Responsibility called the move “a positive step”.