May 2023 Newsletter

Hello all and please see below for our top picks of May’s ESG stories: 

The Taskforce on Nature-related Financial Disclosures Framework – An Overview of the Fourth Beta Release

The Taskforce on Nature-related Financial Disclosures (TNFD) has released the fourth and final beta version of its Framework, following an 18-month consultation and development process. The fourth version includes sector-specific guidance, recommended disclosure metrics, and updates to the LEAP (Locate, Evaluate, Assess, Prepare) approach for risk analysis. The Framework retains the four-pillar structure of the Task Force on Climate-related Financial Disclosures (TCFD), with 14 recommended disclosures and a tiered approach to metrics depending on the organization's sector and business. The release follows the commitment of over 190 countries to the Kunming-Montreal Global Biodiversity Framework, making it a key international policy reference for the TNFD. The final TNFD Framework is due to be published in September 2023, aligning with the UN Biodiversity Conference and its Global Biodiversity Framework. LINK

ESG in Focus for Revised UK Corporate Governance Code

The Financial Reporting Council (FRC) is proposing stronger requirements for sustainability and ESG reporting in a consultation on revisions to the UK Corporate Governance Code. The proposed changes aim to enhance the comply-or-explain mechanism, to incorporate the new Audit Committee Standard, and to make necessary adjustments that reflect the board and audit committee's responsibilities for sustainability and ESG reporting. The FRC's move has received support from UK pension fund Railpen, who emphasise the importance of robust audit, risk, and internal control standards in building investor trust and ensuring accurate financial representation. Railpen also highlights the significance of good corporate governance and investor protections in sustaining the UK's position as a leading global market. LINK

UK Asset Owners to Challenge Managers on Fossil Fuel Votes

A group of UK-based asset owners, including Brunel Pension Partnership, Scottish Widows, and The Church of England Pensions Board, will meet with major fund managers following the 2023 proxy season to assess their alignment with long-term climate-related interests. The asset owners are concerned about a perceived misalignment between their interests and how investment managers have voted at the AGMs of European oil and gas companies. The asset owners will also commission an academic to review how asset managers have interpreted their clients' long-term interests in exercising stewardship dutiesget in touch, with a focus on voting at European AGMs. LINK

Insurers Exit Net Zero Insurance Alliance as U.S. Political Pressure Builds

Several major insurers, including Lloyds, AXA, and Allianz, have withdrawn from the Net-Zero Insurance Alliance (NZIA), dealing a blow to the UN Environment Program (UNEP)-backed collaboration. The NZIA supports insurance companies in aligning their underwriting and risk management practices to net-zero greenhouse gas emissions. The insurers' decision coincides with mounting pressure from US Republican politicians, after a letter from 23 US state Attorneys General warned NZIA members to consider “the legality of your commitments to collaborate with other insurers and asset owners in order to advance an activist climate agenda.” The NZIA, established in 2021, had almost 30 members by early 2023. In a statement, UNEP said that withdrawal announcements were made “in light of the recent discussions within the United States,” and especially affected “those with significant US business and exposure.” The NZIA is part of the Glasgow Financial Alliance for Net Zero (GFANZ), and while most departures have come from the NZIA, other GFANZ alliances have not been affected. LINK

Solar Investments to Outstrip Oil and Gas – IEA

Research from the International Energy Agency (IEA) suggests that clean energy spending is projected to reach $1.7 trillion in 2023, surpassing investments in oil and gas for the first time. However, the IEA warns that fossil fuel investments in 2023 will be more than double the required levels to achieve a net-zero trajectory by 2050. Upstream oil and gas spending is also expected to rebound to pre-pandemic levels. Factors driving clean energy investments include improved economics relative to volatile fossil fuel prices and increased policy support, underpinned by legislation including the US Inflation Reduction Act. LINK

France Signs Short Haul Flight Ban into Law

The French government has enacted a new law prohibiting short-haul domestic flights on routes which can be travelled by train in under 2.5 hours. This regulation is part of France's Climate and Resilience Law, introduced in 2021 with the aim to reduce greenhouse gas emissions by 40% by 2030 and achieve carbon neutrality by 2050. The transport sector is responsible for 30% of emissions and is therefore critical for decarbonization efforts. The law, which has already come into effect, could be considered a largely symbolic step, since only a small number of flight routes are affected. The European Commission approved the law, but with conditions requiring rail alternatives to serve passengers who would otherwise fly, thus reducing the number of banned routes. LINK

If you’d like to discuss any of these items, please get in touch.