ESG round-up: European Council gives green light to CSRD

The latest developments in sustainable finance: Finnish fund Varma to target intermediaries over fossil fuel financing; ClientEarth drops case against central bank.

The European Council has given its final approval to the corporate sustainability reporting directive (CSRD), the legislation which replaces the existing non-financial reporting directive (NFRD) and sets the reporting requirements for around 50,000 companies operating in the EU. The new rules will need to be implemented by member states within 18 months, but companies already subject to the NFRD will be required to report on the 2024 financial year in 2025. This means some national authorities may not have transposed the directive during the period companies should be collecting the information they are required to report.  

The EU’s Platform on Sustainable Finance, an independent advisory body set up to assist in the development of the bloc’s flagship green taxonomy, has published its final report, providing “supplementary advice on methodology and technical screening criteria for the climate and environmental objectives of the EU taxonomy”. The European Commission is in the process of selecting new members and observers for the next iteration of the platform, which will be given a two-year mandate starting Q1 2023.  

The Vatican’s Pontifical Academy of Social Sciences has published its first ever guidelines on faith-consistent investing. The guidance is aimed at helping Catholic institutions and individuals invest in accordance with the values of the Catholic Church. It provides exclusion criteria and advises that faith-based investment should involve seeking opportunities that promote sustainable development. The academy said: “Mensuram Bonam hopes to shed the light of the Gospel and of Catholic social teaching on the specific area of economics and the world of finance which may be referred to as the management of financial assets or investing.” 

Finnish pension fund Varma is preparing to exclude intermediaries that fund fossil fuel-based energy. The €58 billion fund plans to use monitoring and negative screening to try to persuade banks to stop financing polluting forms of energy, such as coal and oil. Hanna Kaskela, Varma’s sustainability director, said: “This new means of engagement is aligned with our sustainability programme, and with our climate targets, which were updated in June. We have outlined that, in addition to our own climate targets, we will start demanding more ambitious climate actions from our co-operation partners. We are also developing our value chain, meaning we will require sustainability from the partners we buy services from.”

Environmental law charity ClientEarth has withdrawn its case against the Belgian central bank in response to the European Central Bank’s (ECB) decision to consider the climate in quantitative easing reforms. The lawsuit had sought to stop the Belgian National Bank from directing cheap finance to polluting businesses under an ECB bond-buying scheme known as the Corporate Sector Purchase Programme (CSPP). In September, the ECB announced that it may consider halting investments in bonds issued by climate laggards as it introduces a climate tilt to its corporate bond purchases. ClientEarth said the bank’s reforms “have remedied the illegality alleged”.   

Danske Bank has updated its green financing framework, making it “broadly aligned with the Technical Screening Criteria of the EU Taxonomy”. Samu Slotte, the bank’s global head of sustainable finance, said: “It is important for us that our Green Finance Framework facilitates financing of a wide range of investments needed for Nordic societies to meet their ambitious environmental objectives. Thus, our framework has some deviations from and additions to the still-developing EU taxonomy.”