ESG round-up: Germany to abstain from CSDDD Council of the EU vote

The latest developments in sustainable finance: Nigeria launches consultation on ISSB standards; BoA removes explicit mentions of bans on financing coal and Arctic drilling.

Germany’s Social Democrat labour minister has said the country will abstain from a vote by the Council of the EU on Friday on the bloc’s Corporate Sustainability Due Diligence Directive, according to Reuters. Insiders told Responsible Investor last week that the Italian government has also raised concerns about the directive’s provisions relating to transition plans. By contrast, France, Spain and the Benelux countries are said to be firmly behind the directive. If the text is greenlit on Friday, the approval vote of the Legal Affairs Committee of the European Parliament is set to follow on 13 February. The final vote by MEPs is expected in April at the last plenary session before the parliamentary elections.

The Financial Reporting Council of Nigeria has released a draft of its ISSB adoption roadmap, following final discussions and approval from an “adoption readiness” working group. The report covers a recommended framework for Nigerian companies, a phased-in adoption timeline and assurance requirements for reporting. The council has launched a consultation on the roadmap until 14 March.

Bank of America has removed explicit bans on financing coal mines and Arctic drilling from its updated environmental and social risk policy report. The bank’s previous policy stated that it “will not directly finance” oil exploration and extraction in the Arctic, thermal coal mines or new coal-fired plants. The new text says these activities will go through “enhanced due diligence”. A spokesperson for the bank said: “We have a risk-based process for client transactions. Certain client relationships or transactions that carry heightened risks will continue to go through an enhanced due diligence process involving senior-level risk review.”

A lawsuit has been filed challenging Californian laws requiring companies with more than $1 billion of annual revenues operating in California to disclose their Scope 1, 2 and 3 emissions. The bill was signed by California governor Gavin Newsom in October. The lawsuit – filed by federations and associations including the US Chamber of Commerce, the American Farm Bureau Federation and the California Chamber of Commerce – says the bill “attempt[s] to regulate speech related to climate change”, which violates the First Amendment, and will “compel thousands of businesses to make costly, burdensome and politically fraught statements” about their operations.

The Global Reporting Initiative has released a mining sector standard (GRI 14) to address the sustainability impacts of the industry. The standard addresses 25 topics that are likely to be material for mining companies. It sets expectations for site-level transparency that reflect local impacts, to help stakeholders assess impacts and risks by location and specific minerals. It covers themes including emissions, waste, human rights, climate change, biodiversity, anti-corruption and community engagement. It also introduces three new topics not previously addressed by GRI: tailings management, artisanal and small-scale mining, and operating in conflict zones.

The National Bank of Kuwait has launched a sustainable financing framework, paving the way for the country’s first ESG-labelled international bond issuance. The framework is aligned with the principles of the International Capital Market Association and Loan Market Association, S&P Global Ratings has confirmed. Under the framework, Kuwait’s largest lender can issue green, social and sustainability financing instruments.

Morningstar has upgraded five of the 12 asset management firms assessed in its ESG commitment level report. The fifth edition of the report saw Comgest, Fidelity International and Pictet upgraded from basic to advanced, based on Morningstar’s four-point scale (low, basic, advanced, leader). Janus Henderson and Man Group were upgraded from low to basic. Amundi, HSBC AM and Jupiter retained their advanced commitment level. The total ESG commitment level covers 97 firms, of which 8 percent are rated as leader and 24 percent as advanced. The largest group of firms (45 percent) are ranked as basic, with the remaining 23 percent rated as low.

Nature Action 100 has launched a request for proposals for a consultant to analyse the initiative’s target companies against its benchmark. Currently in draft phase, the purpose of the benchmark is to assess the performance of companies against the initiative’s investor expectations. It is comprised of six indicators, 17 sub-indicators and 58 metrics. The deadline for submitting a proposal is 18 February.

Global green bond sales will likely increase in 2024 as falling interest rates in the US and Europe create favourable debt market conditions for both investors and issuers, according to analysis by S&P Global. Green bond sales rose to $492 billion in 2023, from $446 billion the previous year. The International Monetary Fund predicts global GDP growth of 3.1 percent in 2024, according to the World Economic Outlook released in January. In addition, new European standards for green bond issuance – requiring deals to be 85 percent aligned with the EU taxonomy from next January – will add support to the market, S&P analysts said.

Carbon offsets could reach $238 per ton by 2050, a BloombergNEF report has predicted. Following a volatile year for voluntary carbon markets, 2024 could determine whether confidence in carbon credits can be restored, the authors wrote. The market is heavily oversupplied, but companies have shown “elasticity of demand” and abandoned offsets due to criticism and rising prices. Should this elastic demand persist in the current market as prices rise, companies could purchase one billion offsets annually in 2030, levelling off to 2.5 billion in 2050, the study predicted.

A new blended finance initiative – the Green Guarantee Company – has been launched to mobilise private investment for developing countries. It is funded by the UK Foreign, Commonwealth and Development Office, the Green Climate Fund, the Nigeria Sovereign Investment Authority and US Agency for International Development. The GCC will issue guarantees to credit enhance debt to climate mitigation and climate adaptation borrowers/projects undertaken in developing countries. It has obtained a BBB investment grade rating from Fitch Ratings, allowing it to leverage its initial $100 million capital 10 times, to write and hold up to $1 billion of guarantees. GGC is forecasting issuing a minimum $5 billion of guarantees to support climate projects by 2035.

The Principles for Responsible Investment has launched a new funding initiative for academic research in responsible investment, with a focus on transition finance. The Reynolds and Gifford PRI grant will recognise the contributions from James Gifford and Fiona Reynolds to sustainable finance, and provide £300,000 ($377,000; €350,000) to a university or consortium via a call for research. The launch event will take place on 25 March.

The Sustainable Investment Exchange (SIX) has been launched in Australia. Billed as the country’s “first share trading platform to combine activism with investing”, SIX will enable shareholders to sign on to campaigns to join collective engagement efforts and propose resolutions at AGMs.