April 2023 Newsletter

We hope you enjoyed a relaxing Easter break. Here’s a round-up of some of the top ESG stories from April.

SFDR Level 2 RTS Proposed Changes

The European Supervisory Authorities (ESAs) have proposed amendments to the Regulatory Technical Standards (RTS) under the Sustainable Finance Disclosure Regulation (SFDR) in a joint consultation that was published in April. The proposed amendments include extending the list of social indicators for principal adverse impacts, refining the content of several other indicators, alongside amendments addressing decarbonisation targets. The consultation also seeks feedback on the treatment of derivatives and changes to the Do No Significant Harm (DNSH) disclosure design options. The consultation closes on 4th July and the ESAs are expected to deliver the final draft standards later this year. The amendments aim to promote transparency and consistency in sustainability disclosures, as well as to contribute to the EU's sustainable finance agenda. LINK

ESG fund downgrades in Europe look set to reverse

Analysts predict that many previously downgraded European sustainable investment funds could be upgraded to their previous status, transitioning from "light green" Article 8 funds to "darker green" Article 9 funds, following clarification from the European Commission in April. The forecasted upgrades risk sparking new accusations of greenwashing and the trend is expected to cause confusion for investors who may struggle to understand the varying methodologies used, leading to greater due diligence demands. The clarification recommends a discretionary approach allowing fund managers to define for themselves what they mean by sustainable or environmental, social and governance standards. There is speculation that a wave of reclassifications of ETFs may also materialise in response to the new guidance. LINK

G7 Ministers Urge Implementation of Mandatory Climate Disclosure

Finance ministers from G7 countries issued a joint statement urging the implementation of mandatory climate-related financial disclosures. The statement highlighted the need for greater transparency and consistency in climate disclosures to help investors make informed decisions and mitigate climate-related risks. Ministers acknowledged that voluntary disclosures are not enough, calling instead for a globally consistent, mandatory reporting framework based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The G7 ministers also pledged to lead by example and disclose their own climate-related financial risks and opportunities. The statement comes ahead of the G7 summit in June and suggests momentum globally toward establishing mandatory climate reporting standards. LINK

ISSB prepares to consult on future priorities and international applicability of the SASB Standards

The International Sustainability Standards Board (ISSB) has announced the launch of a consultation later this year to gather feedback on the international applicability of the Sustainability Accounting Standards Board (SASB) standards. Launched by the International Financial Reporting Standards Foundation, the ISSB is tasked with creating a global sustainability standards system. The consultation will also gather input on the ISSB's future priorities, focussing especially on materiality, disclosure, and technology in sustainability reporting. The ISSB stated that it will explore the use of the SASB standards as a basis for its work and is currently considering whether to incorporate SASB standards into its own reporting framework. The consultation will run from Q3 to Q4 2023, with the ISSB expected to publish the results in early 2024. LINK

'Fit for 55': Council adopts key pieces of legislation delivering on 2030 climate targets

The Council of the European Union has adopted several pieces of legislation aimed at achieving the bloc's 2030 climate targets under the "Fit for 55" package. The package includes revised Renewable Energy and Energy Efficiency Directives, a Carbon Border Adjustment Mechanism, and reforms to the EU Emissions Trading System. The legislation is designed to help reduce the bloc's greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. The new legislation is a milestone in EU efforts to tackle climate change and the new measures support the implementation of the European Green Deal. LINK

If you’d like to know more about any of this and whether Danesmead ESG can help you, please contact us.