March 2024 Newsletter

We hope you’ve had a good long weekend. Please see below for our top ESG stories from March.

SEC announced scaled-back climate rules

The U.S. Securities and Exchange Commission (SEC) announced its long-awaited climate-related disclosure rules, which will require large US public companies to report their climate related risks and impacts and disclose their GHG emissions. The new rules have been scaled back compared with the original draft, with elements such as mandatory Scope 3 emissions disclosure removed, and requirements for disclosure of Scopes 1 and 2 limited to larger organisations, and only when deemed material by the disclosing organisation. Environmental groups have criticised the rule as lacking in ambition while several right-wing groups including ten U.S. states and several energy companies have initiated legal challenges against the rule. The Fifth Circuit U.S. Court of Appeals recently released a ruling granting an administrative stay in response to a petition by oilfield services company Liberty Energy, and frac sand company Nomad Proppant.

Vanguard found guilty of greenwashing

The Australian investment firm Vanguard was found guilty of greenwashing by a federal court in late March 2024. In the latest in a series of greenwashing cases brought by the regulator - the Australian Securities & Investments Commission (ASIC) - the court found the firm had made “misleading claims” about one of its ESG funds. This included not excluding certain investments in fossil fuel companies as it claimed in marketing materials, which “amounted to misleading conduct”, the court found. The regulator commented on the case, saying it “sends a strong message to companies making sustainable investment claims that they need to reflect the true position”.

Sexism in the City – serious problems persist for women in the City

The UK House of Commons Treasury Committee’s “Sexism in the City” report found “appalling” levels of sexism and misogyny persist across the City of London’s financial sector. From underrepresentation and gender pay gaps to sexual harassment and bullying, the report found little has changed in the 5 years since it last reported, and many firms still regarding diversity as a “tick-box” exercise. Alarming levels of sexual misconduct including rape were reported to the Committee. The report concluded that while Government, investors and individuals all have a role to play, it is primarily the responsibility of firms’ senior leaders to fundamentally change the culture within their organisations and prioritise diversity alongside other strategic areas. Read our article on the topic here.

Revised CSDDD receives approval from EU

The European Parliament has approved a revised version of the Corporate Sustainability Due Diligence Directive (CSDDD), aimed at forcing companies to identify and address the environmental and human rights impacts of their supply chains. Opposition from member states including Germany, Italy and France led to delays and ultimately some major revisions to the directive. These include raising the company size threshold from 500 to 1,000, and increase in company revenue threshold from €150 million to over €450 million, effectively leaving two thirds of companies originally expected to be affected, out of scope. Other changes include the  removal of the directors’ responsibility to set up and oversee the due diligence process, and the directors’ duty of care, designed to increase senior level accountability. The financial sector and other so called “high-risk sectors” have also been exempted from the final rules.

IBM study: companies than embed sustainability perform better

A study by IBM and Oxford Economics has found that organisations that embed sustainability across their operations are 52% more likely to outperform their peers on profitability, 56% more likely to outperform their peers on talent attraction, and have a 16% higher rate of revenue growth. The report – based on a survey of 5000 C-suite executives across 22 industries and 22 countries – also found that companies are spending significantly more (43%) on sustainability reporting than on sustainability innovation. This they claim, shows that many organisations view sustainability as an accounting or reporting exercise rather than as a “transformation play”.

Texas school fund divests from BlackRock for ESG connections

In the latest in a series of anti-ESG actions across the US, the Texas State Board of Education announced it will divest $8.5 billion in assets from BlackRock citing the global investment manager’s “dominant and persistent leadership in the ESG movement” as its rationale. The State of Texas has shown itself a vocal opponent of ESG, with its 2021 law forcing state agencies to divest from fund managers that shed investments to reduce greenhouse gas emissions, and the recent ban of Barclays bank from the municipal bond market over its ESG policies. However, calculations by the Texas County & District Retirement System (TCDRS), estimate that divestment could cost more than $6 billion to the local pension system over 10 years.

If you’d like to know more or discuss any of the topics further please get in touch.