ESG round-up: UK pensions regulator sets out expectations ahead of first wave of TCFD reporting

The latest developments in sustainable finance: BlackRock expands 'voting choice' service to half of clients; Singapore publishes green financing framework.

The UK’s pensions regulator TPR has set out its regulatory expectations ahead of the first wave of mandatory TCFD reporting from the country’s largest schemes. In a blog post written by David Fairs, executive director of regulatory policy, analysis and advice, the regulator said it would be reviewing reports over the coming months, while being “mindful of the challenges and concerns trustees have”.

Schemes have previously raised concerns over the cost and resource requirements of reporting. TPR said that, while first year costs may be high, they will likely reduce as data quality and knowledge improves. The regulator is also not expecting to issue penalty notices to scheme trustees in the first wave, unless a report is not published, or “it is clear the trustees have not made a genuine effort to comply with the regulations”. Schemes with more than £5 billion ($6 billion; €5.8 billion) in assets are covered by the first wave of requirements, with the threshold dropping to £1 billion at the start of October.

The US Securities and Exchange Commission is investigating Goldman Sachs Asset Management over claims made about its ESG-labelled funds, the Wall Street Journal has reported. The WSJ cited two people familiar with the matter, which marks the third investor-focused ESG investigation confirmed to be underway, after the WSJ also broke news of the SEC’s investigation of DWS last year and BNY Mellon was fined $1.5 million for “misstatements and omissions about ESG considerations in making investment decisions for certain mutual funds that it managed”.

US financial watchdog the Commodity Futures Trading Commission (CFTC) has put out a request for information (RFI) seeking market input on potential future actions, including regulation, it could take to address climate-related financial risk. Something of a pioneer on climate risks among US regulators, the CFTC commissioned the 2020 Bob Litterman-led report which highlighted a price on carbon as the “single most important step” the US must take to tackle the issue.

Among the questions in the new RFI, put out on 2 June, is whether there are any customer protections that need to be brought in to “promote market integrity in climate-related derivatives products”. The regulator also asked whether there are any aspects of the voluntary carbon markets that are susceptible to fraud and merit greater oversight. Respondents have 60 days to provide feedback.

The Investor Coalition on UK Food Policy has called on the government to introduce a mandatory system of health and sustainability reporting across the food industry, following publication of the government’s response to last year’s National Food Strategy. Headed by Rathbone Greenbank Investments and supported by the likes of CCLA, Legal & General Investment Management, EdenTree Investment Management, Nomura Asset Management and Newton Investment Management, the £6 trillion coalition has been engaging with the government for the past year.

ISS ESG has launched a modern slavery scorecard to help investors evaluate the risk of modern slavery in their investments. The scorecard assesses 7,400 issuers on a series of factors including links to modern slavery controversies, risks in operations and supply chains and preparedness to address modern slavery risk.

The firm has also identified 40 companies for engagement on modern slavery as part of its thematic engagement solution, which will mainly focus on the food and healthcare sectors, with objectives including ensuring mechanisms exist to protect works rights to freedom of association and collective bargaining, and policy commitments to prohibit forced labour.

BlackRock has restated its ambition to allow all clients, including individual investors, to have a say in how proxies are voted at investee companies as it expands the range of clients eligible to use its Voting Choice service. Launched in October, the service allows end investors a say in voting decisions. The second phase of the programme will see more UK-based institutional pooled funds access the service as well as, for the first time, Canadian and Irish ones. Following the expansion, nearly half (47 percent) of BlackRock’s $4.9 trillion index equity assets – including than 650 pooled investment funds in the US and the UK – are now eligible to participate.

The Financial Stability Board and International Monetary Fund have launched a new workplan to address data gaps relating to emerging policy needs, which will include climate change-related metrics. Data points being considered include energy accounts, green debt and equity financing, physical and transition risk indicators. The workplan will be submitted to G20 finance ministers and central bank governors later this year and is expected to be implemented within five years after the launch.

Singapore has published a green bond framework ahead of a planned market debut, with a commitment to raise up to S$35 billion (€24 billion; $25 billion) by 2030. A wide range of expenditure categories including renewables, clean transport and pollution prevention are in the document, which has a second-party opinion from Sustainalytics.