ESG round-up: UK investor associations support proposed ESG ratings regulation

The latest developments in sustainable finance: EU lawmakers ask European Commission to make climate data disclosure mandatory; IDB launches programme to scale up financing in the Amazon.

UKSIF, the Investment Association, the International Swaps and Derivatives Association (ISDA), and the Association for Financial Markets in Europe (AFME) have all welcomed the UK government’s proposal to introduce regulation for ESG ratings providers. UKSIF has called for the Treasury to prioritise transparency alongside recommendations outlined by IOSCO. ISDA and AFME also supported the use of IOSCO recommendations as a baseline for the regulation, but asked for there to be international coordination to avoid a “fragmented” approach across jurisdictions, as well as alignment with the UK’s planned code of conduct for ESG ratings and data. The Investment Association echoed this, asking for regulators to work to develop “consistent frameworks” for the regulation and supervision of ESG ratings and data product providers. It suggested however that the definition of “ESG rating” should be further aligned to IOSCO’s definition which refers to the broad spectrum of rating products in sustainable finance.

A group of EU legislators have said that companies operating in Europe should be mandated to disclose their climate data, in a letter to the European Commission. The move is in response to the European Commission’s proposed European Sustainability Reporting Standards, which it issued in June and is out for consultation until Friday. A key change from an earlier proposal by EU standards body EFRAG is that almost all reporting points will be subject to materiality assessment, including climate change disclosure which EFRAG suggested to make mandatory. The letter to commission president Ursula von der Leyen, executive vice-president Valdis Dombrovskis, and commissioner for financial services Mairead McGuinness said: “The mandatory or justified nature of the standards is the key to reliable, shared and undistorted information. It is therefore necessary to reintroduce the mandatory nature of data points relating to climate, regardless of the outcome of the companies’ materiality analysis.”

The Inter-American Development Bank (IDB) has launched Amazonia Forever, an umbrella programme which looks to scale up financing in the region and enhance regional coordination to accelerate sustainable, inclusive and resilient development. The announcement followed a meeting between IDB’s governors for Bolivia, Brazil, Colombia, Ecuador, Guyana, Peru and Suriname. The programme will focus on promoting the inclusion of women, Indigenous peoples, Afro-descendants and local communities, climate and forest conservation, and strengthening institutional capacities and the rule of law. It will address these topics through a platform which maps existing financial resources, facilitates new financing, and guides policy and investment decisions. The programme will also create a facility to develop investment plans and scale up the IDB’s $1 billion. Finally, IDB governors have also established a network and technical group to oversee the programme’s progress on scaling up financing and joint taxonomies.

APG Asset Management – on behalf of ABP – and Omers Infrastructure have reached an agreement for the acquisition of Kenter, a major Dutch energy solutions platform. The company provides medium-voltage electricity infrastructure, metering devices, battery storage solutions and chargers for electric vehicles in the Netherlands to over 25,000 business-to-business customers. Kenter marks the second major acquisition in the Netherlands for APG and OMERS, after jointly acquiring energy transition platform Groendus in November 2022.

BlueOrchard has launched a gender equity impact strategy in partnership with Global Affairs Canada and IDB Invest. The fund will focus on gender equality, diversity and inclusion across Latin America and the Caribbean, specifically by accelerating the financial inclusion of women, indigenous groups, Afro-descendants, migrants and other underserved groups in the region through an innovative blended finance approach. The Article 9 fund is targeting $200 million and has raised half of the capital so far. This is BlueOrchard’s second dedicated gender-lens investment strategy.

Martin Currie, a specialist investment manager of Franklin Templeton, has launched its first social impact global equity fund. The FTGF Martin Currie Improving Society Fund aims to advance fairness of social opportunity and narrow the equality gap. It will invest in a concentrated, high conviction and long-term portfolio of 20 to 35 companies globally that contribute to three impact pillars which include well-being, inclusion, and supporting a just transition toward a sustainable economy. The Article 9 fund will be registered for distribution in France, Italy, Luxembourg, Netherlands, Sweden and the UK.

Fewer than 60 percent of companies are on track to cut their carbon emissions to net zero by the UN agreed 2050 target, according to a survey by Fidelity International. The manager has called for accelerated action, arguing that regulation is one of the more important forces driving change. So far, 69 percent of European companies are allocating the funds needed to hit the targets by 2040. The research also found that ESG factors have been steadily rising up the agenda for management teams in China, with the country currently targeting net zero by 2060.

Microfinance bank Kashf has issued Pakistan’s first gender bond. Proceeds from the PKR2.5 billion ($9.1 million, €8.3 million) will be used to provide micro-infrastructure finance loans to women-led businesses, home improvements and rehabilitation of flood-affected homes and businesses. All loans are mandated to go toward women.

Also on gender bonds, the ASA Philippines Foundation is due to launch the country’s first gender bond tomorrow (Wednesday), according to local reports. The non-profit foundation has partnered with BDO Capital and Landbank for bond issuance. The organisation – which has an exclusively female clientele – provides cheaper credit access to poorer communities and facilitating women’s participation in business.