ESG round-up: FCA delays sustainability disclosure requirements for second time

The latest developments in sustainable finance: ECB says carbon pricing mechanisms could hinder green transition; UNDP to address sustainability assurance.

The Financial Conduct Authority (FCA) has delayed the release of planned sustainability disclosure requirements (SDR) for the second time this year. The UK regulator said the final policy statement is not expected to be published until Q4, having previously been planned for Q3. The release was first delayed in March due to the volume of feedback the FCA received in response to its consultation on the SDR. The final statement was originally scheduled for publication by the end of H1 this year.

Carbon-pricing mechanisms could hinder longer-term structural changes needed for a green transition, according to a research bulletin published by the European Central Bank (ECB). The paper suggests that carbon pricing could incentivise firms to decarbonise with immediate effects as costs mount. A focus on mitigation, however, can slow down the transition to greener technologies, which is “costlier, has a long gestation period and has an uncertain outcome”, researchers said. The paper advocated the use of subsidies for innovation to correct the balance.

The UN Development Programme (UNDP), along with the International Accreditation Forum (IAF), ISEAL and the conformity body associations, have committed to addressing the need for credible and effective sustainability assurance. The organisations said that consensus-based standards and accredited conformity assessment are critical tools to “establish trust, foster innovation, and drive better sustainability performance”, as well as facilitating interoperability and building confidence in sustainable products and practices.

The International Organisation of Securities Commissions (IOSCO) has published a final report on compliance carbon markets (CCMs) to support members seeking to establish or improve their CCMs. The report examines the specific characteristics of CCMs compared with traditional financial markets and outlines a set of recommendations aimed at making these markets efficient and ensuring they function with integrity. The recommendations – which cover transparency and market integrity – are intended to give regulatory authorities the flexibility they may require consistent with their legal mandates as CCMs are established in their jurisdictions.

An investor group with $10 trillion in assets led by the Dutch Association of Investors for Sustainable Development (VBDO) has called on the EU to produce stronger regulation on plastic packaging and waste. In a letter to MEPs and member state environment ministers, the investors – which include AXA Investment Managers, Legal & General Investment Management and Nordea Asset Management – argued that failure to address the impacts of plastic pollution will expose companies to financial risks that may threaten value creation and investment returns. They called on intensive users of plastic packaging – such as fast-moving consumer goods (FMCG) and supermarkets – to act faster to address the crisis. They also advised companies to reduce their consumption of single-use plastic packaging and implement reuse systems for packaging, as well as phasing out hazardous chemicals in plastics and advocating for better policies.

The EU’s Platform on Sustainable Finance has launched a questionnaire on sustainable finance for SMEs as part of its work on a compendium of market practices, due to be published in early 2024. The platform is looking to explore how the EU taxonomy and wider sustainable finance frameworks can support financial and non-financial actors to transition their activities. The survey specifically seeks to understand how SMEs currently access funding for sustainable projects, as well as their overall approach to sustainability.

Article 9 funds have split ambition levels and goals, according to research by the University of Hamburg and School of Business, Economics and Social Sciences. While 60 percent of funds were found to pursue an impact-orientated investment strategy, 40 percent followed an ESG-orientated investment strategy. The analysis, which examined more than 1,000 Article 9 funds, also concluded that impact-related funds have greater SDG impact scores and higher management fees than ESG-related funds.

The Australian Competition and Consumer Commission (ACCC) has published draft guidance on greenwashing for companies. The guidelines have been launched in response to ACCC research conducted at the end of last year, which found that 57 percent of businesses reviewed were making potentially misleading environmental claims. The guidance sets out the obligations under the Australian Consumer Law which all businesses must comply with when making environmental and sustainability claims. It is comprised of eight principles, which advise to avoid broad and unqualified claims, use simple and clear language, and for companies to be direct about their sustainability transition.

Wealth and asset managers are leading in sustainability expertise among new boardroom appointments, according to research from EY. Twenty-one percent of Europe’s asset managers appointed board members with professional experience in sustainability in H1 2023, compared with only 19 percent of banks and 9 percent of insurers. However, asset management boardrooms are lagging their peers in the banking and insurance sector on gender diversity. Twenty-eight percent of Europe’s financial boards have yet to reach 40 percent female representation, the total in line with the European Commission’s 2026 target. Almost half of wealth and asset management firms have less than 40 percent female boardroom representation, compared with 24 percent of banks and 17 percent of insurance firms.

The UK government has opened an inquiry into barriers faced by women in finance. The committee will examine the progress made in removing gender pay gaps, as well as the role firms, the government and regulators should play in combatting sexual harassment and misogyny. The MPs will also look at how these entities can act as gender diversity role models, and how they should ensure that cultures and policies support women. They will also evaluate progress made on the previous 2018 inquiry, which called for firms to abolish “alpha-male” cultures, remove the stigma of flexible working, and encourage firms to publish strategies for closing gender pay gaps.

Gender lens investing organisation 2x Global has launched a public consultation for a certification process that aims to create more transparency, accountability and credibility in gender lens investing. The framework aims to move the industry away from self-assessment and reporting by providing third-party assurance of the products. 2x Global is also looking to broaden the target audience for its certification to financial institutions, gender bonds, SLBs and institutional investors in 2024. The consultation closes on 4 August.

The Government of Seychelles has launched an SDG Investor map in partnership with the UN Development Programme (UNDP). The tool aims to attract private capital to investment opportunities aligned with the SDGs and the government’s development agenda. The map identifies nine investment opportunity areas across five priority sectors: renewable resources, alternative energy, services, food and beverage, infrastructure, and technology and communications.