ESG round-up: Hong Kong to launch code of conduct for ESG ratings and data

The latest developments in sustainable finance: FRC publishes materiality guidance; French NGOs push for new fossil fuel exclusion in SRI label.

Hong Kong’s Securities and Futures Commission (SFC) has announced plans to sponsor the development of a voluntary code of conduct for ESG ratings and data product providers. The code will be developed by an industry-led working group and the International Capital Market Association (ICMA) will act as the secretariat. The SFC, Hong Kong Monetary Authority and the Insurance Authority will sit as observers to the working group. The code of conduct will align with international best practice, as recommended by the International Organisation of Securities Commission (IOSCO). The proposed code is expected to provide a streamlined and consistent basis for asset managers to conduct due diligence or ongoing assessment on ESG service providers.

The Financial Reporting Council (FRC) has published a report on how companies can improve their corporate reporting through a better “materiality mindset”. The UK regulator has suggested that companies think holistically about what information is material to their stakeholders when preparing annual reports, and has provided advice for identifying material issues where reporting could be streamlined. It also suggested that companies focus on key issues that management and the board are prioritising across the short-, medium- and long-term.

More than 60 NGOs have written to French prime minister Elisabeth Borne calling for the exclusion of companies developing new fossil fuel projects from the country’s SRI fund label. They have urged the government not to “institutionalise greenwashing” by putting “responsible” on a state label for funds investing in oil and gas companies with expansion strategies “contrary to France’s climate objectives”. They added that the credibility of the label will largely rely on the exclusion of these companies. The letter comes amid reports of investors and fossil fuel industry lobbyists pushing to weaken the label criteria.

New Zealand’s financial regulator, the Financial Markets Authority (FMA), has updated its climate-related disclosures scenario analysis to address questions raised during engagement with climate-reporting entities and industry bodies. It outlines the compliance expectations of the FMA for scenario analysis disclosures made under the climate-related disclosures regime. The updated guidance sets out additional clarification regarding quantification in the context of scenario analysis, and provides a diagram to explain the relation between the strategy disclosures and how they inform one another.

ESG-labelled bond issuance in 2023 is expected to hit $950 billion despite a decline in Q3, according to Moody’s latest update. Total issuance fell by 26 percent in Q3 from the previous quarter, with a big decline in volumes from sovereign issuers. Just under 30 percent of total bond issuance in the Middle East and Africa came with a sustainable label, and large deals from the government of Chile meant Latin America overtook Europe as the leading region for SLB issuance by volume. Moody’s said the run-up to COP28 in the UAE had been a catalyst for green issuance in the Middle East. It also noted that the increasing importance of adaptation finance would likely drive an increase in allocations from green bond issuers, which currently spend around 3.5 percent of proceeds on the topic.

The Green Finance Institute has published a local climate bonds toolkit to support local authorities seeking to unlock a potential £3 billion ($3.7 billion, €3.4 billion) in green community municipal investments. The toolkit will enable local authorities to raise capital to fund decarbonisation projects, including wind farms, solar panels, rewilding, retrofit of schools, and electric vehicle charging points. LCBs were piloted by West Berkshire and Warrington councils, which raised £1 million each in 2020.

Robeco has announced plans to make its sustainability scores public in order to “promote data transparency and enhance the quality of sustainable investing”. The initiative to share corporate SDG scores and country ESG scores was initially launched in August 2022 for clients and academics.

Singapore’s United Overseas Bank (UOB) has made steady progress on its net-zero 2050 commitment, according to its first progress report. The bank’s commitment includes specific reduction across five sectors: power, automotive, real estate, construction and steel. Based on its 2022 data, the bank achieved reductions in emissions intensity across all five sectors, with the various metrics at 7-14 percent below the respective net-zero target reference pathways. UOB has also extended S$38 billion ($27.8 billion, €26.1 billion) in sustainable financing as of the end of September, and plans to continue developing its sustainable finance frameworks and solutions.

Redwheel has announced a new sustainable and thematic fund range to address climate change, biodiversity loss and poor access to healthcare. The Biodiversity Fund and the Life Changing Treatments Fund were launched in October, while the Clean Economy Fund is set to launch in November. The biodiversity fund focuses on companies creating green materials, protecting water ecosystems, and preserving land and animal habitat, as well as facilitating recycling and recirculation on the path to a circular economy. The healthcare fund will invest in companies providing essential drugs, health system strengthening, and care. Finally, the clean economy fund seeks exposure to technologies leading and enabling the climate transition, and investing in the energy transition, natural resource preservation and climate adaptation.

Allspring Global Investments has been selected by the London Borough of Hammersmith and Fulham Pension Fund as one of two managers to manage a new buy-and-maintain credit mandate. With this allocation, Allspring will oversee 10 percent of the pension fund’s AUM. Insight Investment via London CIV will manage a further 5 percent of total AUM. The strategy is available to investors via Allspring’s Climate Transition Global Buy and Maintain fund, launched in October, which focuses on high-quality debt issuance from companies with clear net-zero alignment goals.