ESG round-up: UK MPs criticise draft ESG fund rules from FCA

A UK parliamentary committee has raised concerns over draft sustainability fund disclosure requirements put out by the Financial Conduct Authority (FCA). In a letter sent late last year, Harriett Baldwin, chair of the Treasury Sub-Committee on Financial Services Regulations, asked for more detail on whether the FCA had sufficient expertise to enforce the new rules, and whether the proposals could lead to market distortions, increased fees or limitations on the ability to invest in non-UK funds. The committee said it was particularly interested in whether the proposals “could drive funds away from ESG investing” and indicated that it would carry out further work on this.

The consultation period for the ongoing revision of the OECD’s Guidelines for Multinational Enterprises is due to close shortly. The “soft law” framework, and the network of National Contact Points it establishes, are considered among the most-high profile resources available to investors and alleged victims of human rights abuses to hold corporates to account. The exercise excludes a wholesale revision or a full redrafting of the existing rules. The guidelines were last reviewed in 2011.

A third of the activities considered green by the EU taxonomy are bad for the environment, according to a breakaway taxonomy created by a number of former EU scientific advisers. The Independent Science-Based Taxonomy “aims to bring clarity to investors after the EU labelled gas-fired power, nuclear, the burning of trees, intensive logging and other harmful activities as ‘sustainable’ in the EU Taxonomy”, according to a statement. It was developed by a coalition of NGOS including WWF, ECOS, BirdLife International and Transport & Environment, all of which resigned from EC advisory roles due to splits over which activities should be considered sustainable. The group is seeking qualified candidates to oversee the taxonomy’s development.

A group of Catholic investors and institutions have written to Volkswagen requesting details of what actions it has taken to investigate illegal gold mining in its supply chain. The group of 93 institutions has asked the firm a series of questions on how it is investigating allegations of illegal gold mining in Brazil being present in its supply chain, making reference to legal risks under the German supply chain act and proposed EU due diligence laws. Volkswagen did not respond to a request for comment.

The UK is “losing the race on green growth”, according to a report by the Confederation of British Industry (CBI). In-house research suggests that the UK share in European EV assembly and battery production has fallen. The UK additionally stands to lose out on billions in revenue if there is no change in UK production shares by 2030, the CBI argued. Tony Danker, the head of the business lobby group, said: “We’re behind the Germans on heat-pumps, insulation and building retrofits, the French on EV charging infrastructure and the US on operational carbon capture and storage projects – despite the UK’s North Sea advantage. We’re lagging all three on hydrogen funding. This is stunning to many who rightly felt clean energy was ours to own.”

The Asia Corporate Governance Association has criticised Indian investors for writing “boilerplate codes and cursory reports” on their stewardship activities. In a blog post, the ACGA said many codes and reports were difficult to find on company websites and rarely added anything substantive to guidance provided by Indian regulators. The post highlighted insurers’ reports as particularly poor, but praised reports by SBI Funds Management and Kotak Mahindra Mutual Fund for their quality. It finished by warning that, given the risk of regulatory tightening, investors “would be wise to up their game”.

The Climate Bonds Initiative expects 50 sovereigns to have issued ESG-labelled debt by the end of 2023. The NGO said that 43 sovereigns had issued a combined total of $324 billion by the end of 2022 and, with debuts already this year from India and Israel, the total figure could hit 50 this year. It is also developing its own transition standards, and will be expanding its SLB standards and certifications early this year.

The Texas attorney general is co-leading a lawsuit against the US Department of Labor seeking to block a new rule which would allow workplace pension schemes to consider ESG factors when selecting investments. The case, filed by 25 states alongside two oil and gas companies, claims that the rule will harm the states by causing economic damage to their residents, reducing tax revenue from lowered returns to retirement savings and reducing state revenue from lowered investment in the oil and gas industry.

Tokyo Stock Exchange has concluded the last trading day for its carbon credit market pilot, commissioned by the Japanese Ministry of Economy, Trade and Industry (METI). The total trading volume during the period was 148,933 tons of CO2, with 183 companies participating in the market as demonstration participants. The exchange is due to publish a research report in the forthcoming months.