ESG round-up: ICVCM publishes full criteria for assessing carbon offsets

The latest developments in sustainable finance: ISSB launches consultation on sustainability disclosure taxonomy; Reserve Bank of India to issue guidance on climate-related credit risks.

The Integrity Council for the Voluntary Carbon Market (ICVCM) has fleshed out details of its carbon offsets certification standards in an update published today. The framework provides a global assessment criteria for providers of carbon credits and aims to boost transparency and safeguard product quality within the market. Today’s announcement, which followed a preliminary release in March, includes minimum requirements for additionality, permanence and fossil fuel backlists. The initiative is billed by the ICVCM as “similar to one a financial regulator would take”. The first crop of certified credit programmes are due to be announced by the end of the year.

The International Sustainability Standards Board (ISSB) has opened a 60-day consultation on its sustainability disclosure taxonomy. The proposals reflect the disclosure requirements in the ISSB’s first two standards, IFRS S1 and IFRS S2. The ISSB said that a common digital taxonomy is needed to “facilitate structured digital reporting of sustainability-related financial information prepared applying the ISSB standards”. The ISSB has been working on its digital taxonomy in tandem with the development of its standards to facilitate digital consumption of sustainability-related financial disclosures when the standards are first applied. It will review feedback on the proposals in the second half of 2023 and aims to issue the final digital taxonomy early in 2024.

The European Commission is expected to publish the final European Sustainability Reporting Standards (ESRS) on Friday (28 July), according to sources. It follows the draft publication of the new corporate sustainability reporting rules in June. The consultation on the draft ESRS received more than 600 responses, including one by influential investor groups including the Principles for Responsible Investment (PRI) and the European Fund and Asset Management Association (EFAMA) that voiced concerns, for example, about the EC’s plan to make all disclosure requirements under the rules subject to materiality assessments. The EC did not reply to a request for comment.

The Reserve Bank of India (RBI) is due to issue guidance on climate-related credit risks for banks, as well as a disclosure framework for climate-related financial risks and guidance on climate scenarios. In its discussion paper on climate risk and sustainable finance, RBI said it intends to prepare a strategy based on global best practices on mitigating the adverse impacts of climate change, learnings from participation in standard-setting bodies and other forums.

Capital Markets Malaysia (CMM) has started a four-week consultation on its simplified ESG disclosure guide, due to be launched in November. The guide – designed for SMEs – will align with major global frameworks and reporting initiatives, including the International Sustainability Standard Board (ISSB) and Global Reporting Initiative (GRI). It will also include local reporting requirements including the Malaysian code on corporate governance, the Bursa Malaysia listing requirements, and Bursa’s sustainability reporting guide.

As of last December, more than 2000 climate-related cases have been filed in 65 jurisdictions, including international and regional courts, according to a climate litigation report by the UN Environment Programme (UNEP). The number of cases filed this year represents a steady increase from 884 cases in 2017 and 1,550 cases in 2020. Courts are beginning to assess the responsibility of financial institutions for the climate dimensions of their investments, according to the research. Young people, women’s groups, local communities, and Indigenous Peoples, among others, are taking a prominent role in bringing these cases and driving climate change governance reform around the world.

Goldman Sachs Asset Management has launched two Article 9 bond funds, the Global Impact Corporate Bond Fund and the USD Green Bond Fund. Both strategies draw on the manager’s green and impact bonds assessment methodology to select bonds that finance environmental, social and sustainability projects. The first bond looks to invest in green, social and sustainable bonds across the corporate credit spectrum that have clearly defined social or environmental objectives. The Green Bond Fund invests globally in both corporate and government bonds and investment grade credit.

The Institute and Faculty of Actuaries (IFoA) has announced a biodiversity policy to advocate for the development of effective policy frameworks and methods for managing biodiversity risk. It is also looking to use its influence in the actuary world to help equip wider global financial services to fully incorporate biodiversity risk. The IFoA is a signatory of PRI and the UN’s Principles for Sustainable Insurance. It will continue to work with these organisations, as well as the Taskforce on Nature-Related Financial Disclosures (TNFD), to better align the finance system with an understanding of biodiversity risk.

WTW has launched an engagement tool designed to help company boards and senior management better understand their exposure to ESG and climate-related risks and opportunities. The tool has been launched in response to growing shareholder, investor and regulatory pressure, and demand for climate risk and transition plan disclosure. In a recent survey by WTW and the Nasdaq Centre for Board Excellence, around half of respondents reported that their board lacks the expertise needed to provide oversight of the climate risks facing their companies. The survey also recorded that only three in five respondents thought their board has dedicated sufficient time and resource to climate risk governance.