ESG round-up: SEC sets April deadline for climate disclosure rule

The latest developments in sustainable finance: Finland to transpose CSRD by year-end; Mercer Super reaches settlement in greenwashing case.

The US Securities and Exchange Commission (SEC) has set a deadline of April 2024 for several ESG-related rules. These include the long-awaited climate disclosure rule, which has faced forceful opposition from companies and conservative politicians since the financial regulator proposed it in March 2022. The rule was expected in October, but Bloomberg has reported that there is no mention of it on the agenda of a meeting next Wednesday, suggesting that it will not be dealt with this year. Also given an April deadline were changes to SEC’s Rule 14a-8, which softens filing requirement for shareholder proposals, and a proposed ESG disclosures rule for investment firms and advisors.

Staying with the SEC, in a closing speech at a compliance conference on Thursday, the regulator’s director of municipal securities, Dave Sanchez, told attendees that ESG risks “can rise to the level of materiality”, and warned that in some cases failure to disclose such risks could be considered fraud. “If an issuer is going to market on a general obligation secured entirely by a tax pledge of property that is 99.9 percent in a 100-year flood zone with a high likelihood of significant flood damage before the end of a bond term, and the offering document does not include any reference to flood risk, there may be an anti-fraud issue,” he said.

Finland will transpose the Corporate Sustainability Reporting Directive (CSRD) before the end of the year, a member of the Finnish government has told Responsible Investor. It will become the second country to transpose the directive, after France transposed the text this week. As part of the transposition, member states are required to choose whether they will use only auditors, or both auditors and independent assurance providers, for limited assurance requirements on CSRD reporting. Finland has opted to use only auditors. The transposition deadline for all EU member states is July 2024.

Mercer is expected to pay an A$11.3 million ($7.5 million, €6.9 million) fine early next year as part of a court case with the Australian Securities and Investments Commission (ASIC), according to local news outlets. The penalty is still subject to approval from the Federal Court. The financial watchdog initiated proceedings against the super fund in February for allegedly misleading statements regarding the sustainable characteristics of some of its superannuation options. It marked the first time ASIC had taken an Australian entity to court over greenwashing concerns. Active Super and Vanguard Investments are also in current proceedings over allegedly misleading sustainability statements.

German promotional bank KfW has added biodiversity to its green bond programme for 2024, as part of its alignment to “current developments and expectations from its international investors”. The new framework, which will take effect on 1 January, will see KfW contribute to preserving biodiversity through reforestation projects. Corporate investments for climate change mitigation have also been added to the framework, which includes for the first time a review of KfW’s green bond assets for their substantial contribution to climate action and compliance with the EU Taxonomy minimum safeguards on occupational safety and human rights.

Sustainalytics has issued a second party opinion (SPO) for Saint Lucia’s Blue Bond Framework. The ESG ratings provider said the framework was “credible and impactful”, as well as aligned with the four core components of the green bond principles: pollution prevention and control; environmentally sustainable management of natural resources and land use; sustainable water and wastewater management; and sustainable coastal and marine tourism and development. The decision by Saint Lucia’s Ministry of Finance to establish a blue bond committee responsible for identifying and mitigating environmental and social risks was in line with market practice, Sustainalytics said. It also approved of the management of proceeds, which the Ministry of Finance will be responsible for, and of plans for reporting on the allocation and impact commitments.

Man Group has partnered with the Columbia Centre on Sustainable Investment (CCSI) – a joint centre of Columbia Law School and Columbia Climate School – to conduct research addressing how climate impact is defined and measured in fixed income and equity portfolios. The joint research will aim to produce a “more refined” decarbonisation framework in order to bring “rigour and greater standardisation” when calculating the climate impact of public market securities. Man Group and CCSI also plan to identify existing industry challenges and develop solution frameworks for consultation with financial institutions and standard setters, before publishing a whitepaper on the agreed implementation methodology.