ESG round-up: UK FRC consults on corporate governance code changes

The UK’s Financial reporting Council (FRC) has launched a public consultation on its corporate governance code. This follows the consultation on restoring trust in audit and corporate governance last year, in which the UK government invited the FRC to strengthen the UK corporate governance code. The proposed changes include revising the framework of prudent and effective controls to provide a stronger basis for reporting, improving the functionality of comply-or-explain and making revisions to reflect the responsibilities of the board and audit committee for sustainability and ESG reporting and assurance.

The new draft code also suggests that companies should report on “the sustainability of the company’s business model and how environmental and social matters are taken into account in the delivery of its strategy, including its climate ambitions and transition planning”. The consultation closes on 13 September.

The Securities Commission (SC) Malaysia has established a national-level Advisory Committee on Sustainability Reporting (ACSR) to support the implementation of the International Sustainability Standards Board (ISSB) standards, which are due to be published at the end of June. The ACSR, chaired by the SC, comprises representatives from Bank Negara Malaysia, Bursa Malaysia, the Companies Commission of Malaysia, the Audit Oversight Board and the Financial Reporting Foundation. The committee, which has received endorsement from the Ministry of Finance, will be responsible for handling the approach and timeline of the implementation.

The largest emitters in the energy, utilities and mining sectors have seen their share prices fall when faced with climate-related lawsuits, according to research from the London School of Economics and Political Science’s Grantham Research Institute on Climate Change and the Environment. The paper found that stock market responses to cases filed against big emitters reduced the firms’ value by an average of 0.57 per cent, and 1.5 per cent following unfavourable judgements. The analysis based on a database of filings and decisions relating to 108 climate change lawsuits filed worldwide against US and European-listed corporations between 2005 and 2021.

The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) has launched a call for Expressions of Interest (EOI) for the analytical implementation of short-term climate scenarios. The green central banking group is looking to introduce short-term scenarios to better capture the adverse impacts of a disorderly transition and severe natural disasters. The project will aim to develop between three and five short-term adverse scenarios. They will create up to three disorderly transition scenarios, including abrupt implementation of carbon taxation, financial turmoil due to stranded assets and uncertainty shocks. They will also develop one scenario representing a fragmentation in transition policies across groups of countries, and one scenario with current policies leading to physical hazards. The analytical implementation is envisaged to start in Q3 2023. Interested modelling teams should provide an EOI by 15 June.

New Zealand’s Accident Compensation Corporation (ACC) is collaborating with the New Zealand Superannuation Fund, Government Superannuation Authority and National Provident Fund to engage directly on climate change with some of Aotearoa New Zealand’s largest companies. The Crown Financial Institutions (CFIs) collectively manage the largest pool of investments of any fund manager in New Zealand.

The Australian Council of Superannuation Investors has updated its voting policy to recommend for its members to vote against the boards of ASC300 companies with poor gender diversity on a case-by-case basis. The ASCI said that, for ASX300 boards with less than 30 percent female representation, the recommendation will be to vote against at least one of the following: the board chair, the chair of the nominations committee, a member of the nominations committee or another director seeking re-election.

A group of 20 UK pension companies and organisations have launched the Pensions Equity Group (PEG), a coalition looking to tackle inequalities in pension outcomes in the UK. The group includes Aegon, Aviva, Barnett Waddingham, Legal & General, Scottish Widows, WTW and USS. The group will look to develop a method to consistently measure pension inequalities, initially looking at the gender pensions pay gap before expanding to other areas. It will also work with the government and policymakers, share best practice with employers to address inequalities, and suggest potential industry product developments to help drive greater equity.

Phoenix Group has published a net-zero transition plan outlining a roadmap for how it will decarbonise its investment portfolio, supply chain and operations. Its transition plan is built on science-based targets and aligned with the UK Government’s Transition Plan Taskforce (TPT) disclosure framework and guidance from the Glasgow Financial Alliance for Net Zero (GFANZ). The UK pensions giant is targeting a 25 percent reduction in the carbon intensity of around £160 billion ($198 billion; €184 billion) of listed equities and credit by 2025. It has introduced an exclusion policy, transferred 1.5 million workplace pension customers into sustainable multi-asset strategies and is also in the process of deploying around £340 million of policyholder assets into a multi-asset climate solution.

The Principles for Responsible Investment has published additional reporting guidance on minimum requirements and human rights in preparation for the opening of the reporting window on 14 June. The minimum requirements cover three areas for investor signatories including the responsible investment policy, senior-level oversight and accountability, and having at least one person responsible for implementing responsible investment. The human rights guidance is aligned with the United Nations Guiding Principles on Business and Human Rights (UNGPs) which require investors to establish a commitment to respect human rights policy, implement due diligence processes to prevent and mitigate human rights outcomes, and provide access to support for people affected by their investment decisions.