ESG round-up: UK chancellor confirms nuclear in green taxonomy

The latest developments in sustainable finance: European banks set to face more climate litigation; IDX-listed firms ramp up efforts on ESG.

Chancellor Jeremy Hunt confirmed in Wednesday’s Budget that nuclear will be classed as “environmentally sustainable” in the UK’s green taxonomy. He added that this will give it access to the same incentives as renewable energy and more public investment. In a nod to the controversy over nuclear power’s green labelling, he said: “The sun doesn’t always shine and the wind doesn’t always blow. We will need another critical source of cheap and reliable energy, and that is nuclear. Increasing nuclear capacity is vital to meet our net-zero obligations.”

European banks will increasingly face climate-related litigation risk as the energy transition gathers pace, according to Fitch Ratings. Climate-related lawsuits – such as the one launched against BNP Paribas last month – could set precedents and encourage banks to accelerate their carbon neutrality strategies and phasing out of fossil fuels, it added. The rating agency also said it expects banks to enhance their energy transition policies in the coming years under increasing scrutiny from investors and regulators.

Listed companies on the Indonesia Stock Exchange (IDX) are predicted to ramp up efforts to tackle climate change and improve gender equality following a memorandum of understanding announced between IDX and the International Finance Corporation. The agreement – which is supported by the Swiss State Secretariat for Economic Affairs – will encourage firms to strengthen their ESG standards and practices. It is expected to boost companies’ efforts to better weigh ESG issues, including climate-related risks, and help them deliver on sustainability goals.

Sustainable bond issuance contributing to gender equality goals is poised for long-term growth, according to research by Moody’s. The rating agency reported growing demand from investors for sustainable bonds which finance projects linked to gender equality and female empowerment, owing to mounting pressure on companies to disclose gender diversity details. Last year, $33 billion of green, social and sustainability-linked bonds contributed – either in whole or part – to the financing of projects tied to gender equality, up by $9 billion from 2021.

ISS has launched a global board-aligned voting policy. It is designed to provide subscribing investors with analysis which enables them to vote in line with corporate governance principles, while aligning with the recommendations of company boards on environmental or social proposals. It will also allow subscribers to focus their voting on widely accepted standards of good corporate governance and the protection of shareholder rights.

The Partnership for Carbon Accounting Financials (PCAF) has collaborated with Carbon Risk Real Estate Monitor and GRESB to launch a guide for financial institutions on accounting and reporting GHG emissions from real estate operations. Key recommendations include: differentiation between corporate GHG accounting and accounting of financed emissions; clear definitions for GHG emissions from real estate; and the application of reporting standards, including the GHG protocol corporate standard, PCAF’s standard, and the relationship to TCFD.

Companies are failing to engage suppliers on nature and climate, according to CDP research. The report found that less than half of companies disclosing to CDP report on any of their supply chain emissions and 70 percent said they do not assess the impact of their value chain on biodiversity. While more than 7,000 of the 18,500 companies disclosing to CDP reported that they engaged their suppliers on climate change in 2022, just 915 said they engaged them on water, and only 500 on forests.

CFA UK has announced updates to its certificate in climate and investing. The second edition – which will apply to candidates from 1 April – will streamline content, cover developments in climate science, climate-related risk and the regulatory landscape and expand the focus on carbon markets.