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G7 task force launched to look at integrity and transparency in impact investing

Meanwhile, G20 leaders back TCFD and consider axing fossil fuel subsidies

The UK has today unveiled plans to create an ‘Impact Taskforce’ for investors as part of its  G7 presidency. 

The new Impact Taskforce (ITF) will be overseen by the Global Steering Group for Impact Investment (GSG) and the Impact Investing Institute, and will look at ways to create financial instruments that create positive social and environmental impacts in the wake of the Covid-19 pandemic. 

The GSG, a UK-based charity chaired by impact investing veteran Sir Ronald Cohen, will lead a working group looking at simplifying and harmonising existing impact reporting methodologies and accounting, with an emphasis on promoting transparency and industry integrity. The Impact Investing Institute will lead on the design of principles and recommendations for impact investing vehicles.

Meanwhile, the G20’s finance ministers and central bank governors threw their weight behind the Task Force on Climate-related Financial Disclosures (TCFD) and efforts by the International Financial Reporting Standards Foundation to create a global baseline for ESG reporting, in a joint communiqué over the weekend. 

The statement came at the close of their meeting in Venice, under Italy’s current G20 presidency, and said: “We will work to promote implementation of disclosure requirements or guidance, building on the FSB’s TCFD framework, in line with domestic regulatory frameworks, to pave the way for future global coordination efforts, taking into account jurisdictions’ circumstances, aimed at developing a baseline global reporting standard.” 

It mirrors a similar statement by the G7 earlier this year, and suggests growing regulatory buy-in for TCFD-based global reporting standards, which are expected to be developed by the IFRS Foundation.  

Ahead of the gathering, the Financial Stability Board, which founded the TCFD, wrote to the G20 stressing the need for greater coordination on addressing climate risk, particularly in light of the growing number of initiatives being created to tackle the issue. 

In the letter, the FSB’s Chair, Randal Quarles, who is also Governor and Vice Chairman at US Federal Reserve, urged “authorities to work together to develop a concrete plan to rectify the limitations” of current climate data for financial markets. 

“Addressing such data gaps will enhance the assessment and monitoring of climate-related risks to financial stability and enable market participants to incorporate climate-related financial risks more effectively in their decisions, including the pricing of credit and allocation of capital”, he said. 

The FSB submitted two further reports on climate last week, including a roadmap outlining work that still needs to be done by standard-setting bodies and other international organisations in four key policy areas: disclosures, data, vulnerabilities analysis, and regulatory and supervisory approaches. 

The G20’s comminqué described climate change and biodiversity loss as “urgent priorities” and floated the prospect of “phasing-out of inefficient fossil fuel subsidies” and introducing further “carbon pricing mechanisms and incentives” to help tackle the climate crisis. 

In a separate speech yesterday, US Treasury Secretary Janet Yellen called on countries to ratchet up their formal climate targets ahead of COP26, and urged finance ministers to “help to develop credible domestic strategies, laws, and regulations to meet these targets”.

The US Treasury co-chairs the G20 Sustainable Finance Working Group. Speaking in Venice on the weekend, Yellen said the group would prioritise sustainability disclosure approaches in its work this year. It will also focus on helping to align Multilateral Development Banks’ financing with the Paris Agreement and will make recommendations on how the public and private sectors can coordinate on sustainable finance.