ESG round-up: UK government ‘wants more time to get green taxonomy right’

The latest developments in sustainable finance: FIs accelerate senior women and ESG hires; GSIBs start measuring financed emissions.

Following delays to the release of the UK’s green taxonomy, treasury secretary Joanna Penn said this week that the UK government “wants to take more time to get right and work with the Green Technical Advisory group to do so”. The delay was criticised by industry groups last month. Penn added that the taxonomy “rests on its credibility as a practical tool for investors, companies, consumers and regulators, but there are lessons to learn from when the EU implemented their version of the policy”. The comments were made yesterday at the launch of an Introductory Guide to Green Finance for MPs, produced by the all-party parliamentary group on sustainable finance, the Green Finance Institute, Seahorse Environmental and UK:100. Further news on the green taxonomy is expected in early 2023 as part of the UK’s updated green finance strategy.

Financial boardrooms across Europe have accelerated women and sustainability appointments, according Ernst & Young’s latest Boardroom Monitor. The research found that European financial services businesses have increased their female representation at board level by five percentage points, with a split of 42 percent women and 58 percent men. The findings showed that gender diversity is lowest among wealth and asset management firms’ boards, where the gender split is 40 percent women and 60 percent men. Banks and insurance boards performed best, with women accounting for 43 percent of board seats. On sustainability appointments, the report showed an increase of 13 percentage points, with 32 percent of firms having board directors with sustainability expertise.

Global systemically important banks (GSIBs) with 2050 net-zero commitments have only just started to measure financed emissions resulting from their loans and investments, according to a paper by the board of governors of the Federal Reserve System. The research reviewed how the banks are progressing on their climate action plans. It found that the GSIBs that have committed to increasing green finance have started to do so, but observed that “much work lies ahead to properly measure and disclose climate-related risks, and to better align financing activities with net-zero targets”.

Brazil, China and Southeast Asia could together account for more than half of the projected $22 billion nature-based solution revenues in 2030, according to the Inevitable Policy Response’s first integrated nature and climate scenario. Launched this week, the FPS + Nature incorporates interrelated climate and nature trends to IPR’s flagship 1.8C forecast policy scenario to create a realistic assessment to help investors respond to the climate and nature emergency.

InfluenceMap has released a “beta” version of its US climate policy engagement platform, listing all the major climate policy initiatives underway in the US. The current version offers rankings and profiles for more than 130 of the largest and most climate-relevant US companies, an industry associations tab with information on the climate policy engagement of US industry associations, and a policy tracker tab which collates corporate policy engagement on US climate policies, focusing on an initial list of US federal policies.

Robeco has identified modern slavery, Just Transition and tax transparency as the active ownership team’s engagement themes for 2023. Climate change and biodiversity will be two wider themes which run on an “evergreen basis”. Robeco’s monthly outlook flagged greenwashing and impact washing as a risk which could “derail” the engagement themes for 2023. “We see the potential for sustainability claims to be more strongly scrutinised by regulators, media and investors, and as a result, large financial institutions will struggle to evidence their sustainability credentials across facets of their businesses,” said Colin Graham, head of multi-asset strategies at Robeco. Other risks included inflation, deflation and risk appetite.

The European Commission has published a corrected version of the Regulatory Technical Standards (RTS) in the EU’s Official Journal, following a note in August from BaFin which identified errors. Amendments include editorial corrections in the Annex II heading, as well as correcting the first cross in the following orange box to “no”. Another adjustment has been made in Appendix III where a question had been duplicated. The changes have been made to ensure greater legal certainty before the first implementation of RTS.

The Austrian Financial Market Authority (FMA) has said it will examine sustainable investment products carefully in light of the updates to SFDR which came into force on 1 January. The new regulation demands “concise and clearly visible information on sustainability-related disclosures”, which the FMA will oversee to ensure greater transparency and to combat greenwashing.

The public comment period for the US government’s proposed federal supplier and climate risks and resilience rule has been extended by 30 days to 13 February. If finalised, the rule will require major federal contractors and suppliers to publicly disclose their greenhouse gas emissions and climate-related financial risks and set science-based emissions reduction targets.

UK listed companies are failing to provide data on workforce-related principal risks, according to research from Pensions and Investment Research Consultants (PIRC). The report examined 338 FTSE All Share companies, reviewing their annual sustainability reports on key workforce-related principal risks. Sixty percent of companies listed labour retention as a principal risk, but of these only 24 percent provided data on turnover rates. For the 32 percent that identified health and safety as a risk, 79 percent shared data. PIRC has recommended that companies provide supporting data for workforce principal risks and ensure that principal risk disclosure reflects all major workforce-related principals risks – high turnover, sanctions by the Health and Safety Executive, or difficult industrial relations – to address this reporting gap.