ESG round-up: UK confirms sustainability disclosure standards will align with ISSB

The latest developments in sustainable finance: Australia launches transition methodology research; B2C commits £8.3bn to climate solutions.

The UK government has confirmed that its Sustainability Disclosure Standards (SDS) will be based on two disclosure standards published in June by the International Sustainability Standards Board (ISSB). The government said endorsed standards will only divert from the ISSB global baseline “if absolutely necessary for UK-specific matters”. Work on the SDS will be led by the Department for Business and Trade (DBT) and is due to be finalised by July 2024. Decisions to require disclosure will be made independently by the UK government for registered companies and limited liability partnerships, and by the Financial Conduct Authority (FCA) for listed companies.

The government has established two committees to support work on assessment and endorsement of IFRS S1 and S2. The UK sustainability disclosure technical advisory committee (TAC) – supported by the Financial Reporting Council (FRC) – will assess the ISSB’s disclosure standards on a technical basis and provide independent recommendation on endorsement to the business and trade secretary, via the DBT.

The sustainability disclosure policy and implementation committee (PIC) – overseen by the DBT – will provide advice on an endorsement decision to the business and trade secretary, including PIC’s analysis of interactions between the ISSB’s disclosure standards and existing UK legislation and regulation. Its membership consists of UK government departments and regulators including the Bank of England, FCA, FRC and Treasury. If the business and trade secretary endorses the standards, PIC will coordinate the implementation of SDS by the UK government and FCA.

The Australian Sustainable Finance Institute (ASFI) has published a research paper on transition methodology in response to strong support for a transition category from stakeholders and limited consensus on the appropriate methodology for integrating a transition category into the developing taxonomy. The methodology – adapted from frameworks under development in Singapore and Canada – covers 12 considerations, including aligning transition criteria with a 1.5C scenario, limiting the scope of the transition category to hard-to-abate sectors to encourage the allocation of capital towards decarbonisation of these sectors, and avoiding carbon lock-in by restricting transition to existing projects only.

Border to Coast has committed £8.3 billion ($10.5 billion; €9.6 billion) of its investments to climate solutions. The UK pension pool’s climate change report for the year ending March 2023 disclosed that £6.9 billion of equity and fixed income assets are in investments aiming to reduce carbon emissions, while its private markets deployment in investments in the transition to a lower-carbon economy has more than doubled to £1.4 billion.

On the stewardship side, the company disclosed that in 2022-23 it opposed the majority of Say on Climate resolutions due to “insufficient progress on climate change and diversity”. It voted against 93 percent of company transition plans and 73 percent of climate-related shareholder proposals. Notably, it voted against management 70 percent more than in 2021-22 on diversity grounds.

UBS Asset Management and Aon have launched a Global Emerging Markets Equity Climate Transition Fund that supports the transition to a low-carbon economy while factoring in social characteristics. The fund’s rules-based investment strategy invests in emerging market companies and tilts towards climate change stocks aiming to decarbonise in line with a 1.5C scenario. The fund will also be exposed to companies that align with the UN SDGs relating to health, clean energy, decent work, responsible consumption and production, and climate action. The strategy is being seeded with £190 million from Aon’s defined benefit and defined contribution solutions.

The Romanian Sustainable Investment and Finance Association (RoSIF) has joined Eurosif as an observer. RoSIF was co-founded in 2021 by Theodor Cojoianu, associate professor in sustainable finance at the University of Edinburgh and a member of the EU Platform on Sustainable Finance and the UK Green Technical Advisory Group (GTAG); Ioana Subașu, sustainable investment analyst at Royal London Asset Management; and Vasile Strat, dean of Bucharest Business School. RoSIF is an apolitical, nonprofit organisation that promotes sustainable institutional investment decision-making in Romania and Central and Eastern Europe.

The Climate Governance Initiative (CGI) has launched the 29th chapter in its network, for Southern Africa. This is the second chapter in Africa to be launched, following the launch of the chapter for Egypt by the European Bank for Reconstruction and Development (EBRD) and CGI in July. It brings together the 16 members states of the Southern African Development Community. The platform will provide training for board members to drive climate change action in their organisations.

The World Bank has opened a consultation on its draft gender strategy for 2024-30. The proposal puts forward a plan to accelerate gender equality in alignment with the World Bank Group’s evolution roadmap. The strategy emphasises innovation, financing and collective action to end gender-based violence, improve human capital, and engage women as leaders. The plan – which builds on the World Bank’s 2016-23 strategy – is open for consultation until 30 November.