June 2024 Newsletter

Hello, and please see our guide to the latest ESG stories from June.

Danesmead ESG at AIMA Conference Putting ESG into Practice 2024

Danesmead ESG will be speaking at the AIMA: Putting ESG into Practice 2024 conference on the afternoon of Tuesday 16th July at the Barbican Centre in London. Catch Daniella Woolf on the “Changing sentiments: what investors really think about ESG” panel at 2.15pm. Or come and find us for a chat at our stand. As usual, we’ll be armed with Tony’s Chocolonely so be sure to swing by and pick some up! Find our more and book here.

The Future of SFDR? ESAs Publish Opinion

Following the EU Commission’s consultation on the Future the SFDR, the European Supervisory Authorities (ESAs) have proposed changes including new "Sustainable" and "Transition" labels for financial products. This aims to address greenwashing concerns and confusion over Article 8 and 9 classifications being used as sustainability labels. The proposed categories are "Sustainable," for investments already sustainable, and "Transition," for those on a pathway to sustainability. Additional disclosure requirements and sustainability indicators have also been suggested. The ESAs recommend a new, prescriptive definition of "sustainable investment" and simplified disclosures for retail investors. These proposals aim to enhance clarity and usability but raise questions about the transition timeline and alignment with other sustainability frameworks. Final decisions by the EU Commission are expected by 2025. Read our full analysis here.

UK General Election 2024: What Labour and the Conservatives Say on Sustainability and Sustainable Finance

The upcoming General Election has seen the Conservatives and Labour presenting distinct sustainability agendas. The Conservatives, under Rishi Sunak, promise a "pragmatic and proportionate approach to net zero," avoiding new green levies, and supporting North Sea oil and gas expansion, aiming for net zero by 2050 but without significant new sustainability measures. Labour, on the other hand, pledges increased spending on renewables, a publicly owned energy company, and support for decarbonizing high-carbon sectors. Both manifestos lack detail on how they’ll support the sustainable finance sector and treat ESG. And both parties’ plans exhibit varying degrees of ambition and specificity in addressing sustainability and net-zero targets. Read our full analysis here.

ESG: Greenwashing – ESMA publishes a Final Report

The European Securities and Markets Authority (ESMA) defines greenwashing as misleading sustainability-related claims and outlines how supervision can be enhanced. ESMA's report highlights that National Competent Authorities (NCAs) are prioritising the supervision of these claims using a risk-based approach and existing EU rules against misleading information. Although greenwashing instances have been quite rare, likely due to limited data access, NCAs are focussing on ongoing supervision and gradual implementation of new regulations. Challenges include insufficient resources and the need for high-quality data, leading some NCAs to consider third-party data and tools. ESMA will continue monitoring greenwashing risks and issue an opinion on improving the EU regulatory framework for sustainable finance. LINK

EU: ECB is Considering Whether to Impose Fines on Banks for Failure to Address the Impact of Climate Change

The ECB is preparing to fine several banks for missing deadlines to assess their climate risk exposure, with potential daily fines of up to 5% of their average revenue. Although fines are not yet finalized, the process is ongoing. A January 2024 ECB study found 90% of EU banks' credit portfolios misaligned with Paris Agreement goals. Frank Elderson of the ECB emphasized the need for banks to manage transition risks and adopt Paris-aligned transition plans with concrete, interim milestones. The ECB stresses that banks must ensure their financed companies also meet net-zero commitments to avoid significant financial, legal, and reputational risks. The ECB’s action highlights the increasing regulatory pressure on banks to align with climate goals, addressing the wider risks associated with failing to manage transition risks. LINK

TNFD Sector Guidance for Financial Institutions

Building on the TNFD recommendations and LEAP assessment approach, the TNFD has released additional guidance for financial institutions focused on applying its recommendations and disclosure metrics. The guidance incorporates feedback from a global consultation process which lasted from September 2023 to March 2024. Its key areas include applying TNFD recommendations, understanding the TNFD metrics architecture, using final TNFD disclosure metrics, referencing sectors for exposure metrics, and mapping SFDR Principal Adverse Impact metrics to TNFD core metrics. There are also resources on nature-related issues and an overview of the TNFD’s disclosure and metrics guidance. LINK 

IFRS Releases Jurisdictional Guide for the Adoption of ISSB Standards

In May, the IFRS Foundation released the Inaugural Jurisdictional Guide for adopting the ISSB Standards, aimed at helping jurisdictions design and plan their adoption or broader use. The guide establishes a global baseline for sustainability disclosures in capital markets, promoting consistent and comparable climate and sustainability-related information. It outlines various approaches for integrating ISSB Standards with existing legislation and policy. Additionally, the IFRS Foundation's Regulatory Implementation Programme provides tools, educational materials, and capacity-building support for jurisdictions. These developments are significant steps towards harmonizing financial and sustainability reporting standards, likely leading more jurisdictions to adopt these standards for better alignment in sustainability reporting.

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