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ESG round-up: GRI raises concerns over draft EFRAG standards

The latest developments in sustainable finance: ICMA criticisms of EP's green bond standard proposal, EU ESG funds have $2bn exposure to Tencent

The Global Reporting Initiative (GRI) has raised concerns about the “level of detail and granularity” in the draft sustainability standards put out by the EU’s corporate reporting body, EFRAG. The standards body, which formally agreed in July to share its technical expertise with EFRAG, highlighted that the draft European Sustainability Reporting Standards (ESRS) uses many of GRI’s optional reporting concepts but makes them mandatory. “[E]ven the most experienced reporters with sophisticated reporting and data collection systems will struggle to comply with all the requirements,” the GRI stated in its response to EFRAG’s consultation, which closes in August. The drafts would “also considerably increase the cost of reporting”, the body said. On Tuesday, the European Council and Parliament reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD), the sustainability disclosure regime which the ESRS will underpin.

ICMA has objected to plans to make EU green bond issuers liable for losses to investors if they break taxonomy rules, which it says will add “real complexity” for borrowers, who will need to analyse and understand their potential liability across the 27 EU member states. In its updated analysis of the EU green bond proposal, ICMA also says that the European Parliament’s proposals contain “several unintended barriers” to financing taxonomy-align capex. It added that the paper had been shared with the Climate Bonds Initiative, which “has confirmed its support for our analysis and recommendations”.

More than half of European asset owners consider managers’ ESG “credibility and credentials” a primary factor in deciding allocations in the ETF market, a survey by BNP Paribas Asset Management has found. The survey of 250 investors across Europe also found that 91 percent expected the market share of ESG ETFs to grow or remain stable in the next year, while thematic approaches were most popular with Swiss and UK investors and least popular in France.

European ESG funds have nearly €2 billion exposure to Chinese internet giant Tencent, despite longstanding fears over mass surveillance and governance risks. Tencent is facing legal action in California over allegations that it monitored content shared by foreign users of its widely used WeChat messaging app and has previously sought to hide shareholder information on its executives. The analysis was produced by Citywire, based on Morningstar fund data.

More than $1 trillion of upstream oil and gas assets risk becoming stranded as a result of policy action and the rise of renewables, according to the latest report by Carbon Tracker. Some $600 billions of those assets are held by listed companies, according to the think thank. The report also states that 90 percent of fossil fuel reserves will have to stay in the ground for global warming to be limited to 1.5C.

Investors can register their interest in participating in an upcoming engagement programme by Ceres that will push corporate water users and polluters to value and act on water as a financial risk, as well as drive the necessary large-scale change to protect water systems. The Valuing Water Finance Initiative follows on from research conducted by Ceres and the members of its Valuing Water Finance Task Force.