ESG round-up: IIGCC publishes oil and gas framework for investors

The latest developments in sustainable finance: SRI label launches consultation on latest revisions; HKEX seeking feedback on ESG framework.

The Institutional Investors Group on Climate Change (IIGCC) has published a framework for investors to assess alignment of oil and gas companies’ transition plans with a 1.5C climate scenario. The release of the net-zero standard follows a two-year process led by IIGCC, with support from the Transition Pathway Initiative (TPI) and investors. The standard will be used for initial public assessments of the largest European and North American oil and gas companies in late 2023. The list of companies for assessment will be finalised by the start of June.

France’s Socially Responsible Investment committee has launched a consultation on the latest revisions to the SRI label. The amendments are in line with recommendations published by the committee in October. The most significant change is the addition of a requirement for funds to exclude coal and unconventional fossil fuels from their portfolios. Other revisions include an increase in the threshold for excluding funds that perform worst on ESG metrics from 20 percent of the fund universe to 30 percent. Quotas on ESG ratings will also be introduced for issuers to consider at least 20 percent of each of the three E, S and G dimensions to guarantee the portfolio’s balance. The consultation period will close on 31 May.

The Hong Kong Stock Exchange (HKEX) has published a consultation paper seeking market feedback on proposals to enhance climate-related disclosures under its ESG framework. The exchange has proposed requiring all issuers to make climate-related disclosures in their ESG reports, as well as introducing new reporting aligned with the ISSB climate standard. This builds on the commitment to mandate TCFD-aligned disclosures by 2025 announced by the Hong Kong Green and Sustainable Finance Cross-Agency Steering Group. The consultation will close on 14 July.

Dutch investors, including APG Asset Management, ING, ABN Amro and Robeco, in collaboration with Morningstar Sustainalytics, have published a report on strengthening human rights risk assessment in countries lacking reliable information. The report offers insights into how companies can improve risk assessment, including engaging with people who may be impacted by certain company activities. The findings also suggest that financial institutions, which traditionally rely on large organisations such as ESG data providers, should look to partner with civil society organisations.

Staying on human rights, research from the Australian Council of Superannuation Investors (ACSI) has found that modern slavery risks are only being reported at a basic level by Australian listed companies. Scores have risen by just 8 percentage points since the assessment of the first year’s reporting, and less than 10 percent of companies are working with suppliers to build risk management. The report – commissioned by ACSI and produced by Pillar Two – is the first detailed analysis of company reporting in the third annual cycle of the Modern Slavery Act. The research methodology assigns scores to company statements against 46 quality indicators over six assessment areas and assesses whether companies reported on areas of recommended practice in government guidance.

Law firm Kirkland & Ellis has warned that California’s climate disclosure bills will have “far-reaching” implications for companies operating in the state. The two bills – which were concurrently introduced on 30 January – will apply to certain US companies which do business in California. The Climate Corporate Data Accountability Act will require companies to publicly disclose and verify their Scope 1, 2 and 3 emissions. The Climate Related Financial Risk Act will demand that companies publicly disclose a climate risk report in line with TCFD recommendations.

CFA UK has launched an investment programme for women to combat gender imbalance across the industry. The course is open to female students graduating in 2023, or within the last two years, and consists of a four-week virtual boot camp provided by Fitch Learning. Participants will be introduced to investment management concepts, including an overview of the investment industry, regulations and regulators, and macro and microeconomic factors. Alongside a broad understanding of the industry, candidates will also learn about risk management, portfolio construction, different asset classes and capital markets.

The UK government’s Department for Business, Energy and Industrial Strategy (BEIS) has launched guidance on ethnicity pay gap reporting for British employers. Since 2017, firms with 250 or more employees have been required to publish gender pay gap figures, but it is not currently mandatory to disclose ethnicity pay gap numbers. The guidance explains how to collect the data, gather the necessary payroll figures, make ethnicity pay calculations, and develop an action plan to address any disparities.