December 2024 Newsletter

7 Jan

Here is our latest selection of ESG stories from December.

The Platform on Sustainable Finance Suggests New SFDR Categories

The EU Platform on Sustainable Finance had proposed a new SFDR categorisation scheme as part of the SFDR review process to address the ambiguity caused by Articles 8 and 9 disclosures being used as labels. The proposed categories include:

Sustainable: Taxonomy-aligned investments.
Transition: Investments supporting the sustainable economic transition.
ESG Collection: Investments in assets with minimum ESG criteria.
Unclassified Products: Requires disclosures on taxonomy alignment, PAI GHG emissions, carbon footprint GHG intensity and UNGPs or OECD MNEs (guidelines for Multinational Enterprises).

Proposing minimum criteria and clear objectives, these categories would allow for streamlined classifications and help to tackle private market data challenges with proxy indicators.

Read our full article on the topic here.

EU Commission Publishes Taxonomy FAQs

The European Commission has released FAQs to assist the implementation of the EU Taxonomy Regulation, answering 155 questions. The EU Taxonomy, adopted in 2020, outlines technical screening benchmarks for economic activities that significantly contribute to climate and environmental objectives. The new FAQs provide guidance on economic activities under the Regulation, DNSH criteria (Do No Significant Harm), and disclosures. They also address areas such as climate change, water, circular economy, pollution, and biodiversity. The Commission aims to simplify compliance, lower costs, and enhance usability, supporting private companies and regulators. The FAQs are provisionally adopted and will be formally confirmed soon.

CSRD Implementation: Addressing Key Readiness Challenges

A PwC survey highlighted that companies experience significant challenges preparing to comply with the EU’s Corporate Sustainability Reporting Directive (CSRD). The report found that only 42% of businesses mandated to report in 2024 were “fully confident” in meeting the directive’s requirements. Key challenges include navigating the directive's complexities, the need for stronger data management, additional resource allocation, and upgrading existing reporting systems. With the CSRD set to expand its scope to approximately 50,000 companies by 2025, this finding reveals widespread readiness gaps and emphasises the significant efforts required by firms to adapt to the evolving regulatory landscape.

CSSF Fines Aviva for ESG Compliance Failures

The Commission de Surveillance du Secteur Financier (CSSF) has fined Aviva Investors Luxembourg S.A. €56,500 (£46,900) for failing to meet professional obligations concerning organisational requirements and conduct rules. The CSSF's inspection revealed persistent governance breaches, particularly in five sub-funds classified under Article 8 of the SFDR. Notably, one sub-fund’s portfolio included bonds from countries with ESG scores below the disclosed exclusion threshold. For fund managers this sanction underscores three key points: the increased possibility of EU regulatory action for misleading on ESG, the lasting challenges of restoring reputation, and the limited resources smaller managers have to defend their claims.

ASA Bans Lloyds Bank Ad Over Greenwashing Concerns

The UK’s Advertising Standards Authority (ASA) has banned a Lloyds Bank advertisement for misleading claims about its environmental contributions. The ad, published on LinkedIn, promoted green home improvement loans, and implied that Lloyds was making significant investments in renewable energies. However, the ASA found this contradicted Lloyds’ 2023 sustainability report, which revealed its financing supported 32.8 million tonnes of carbon dioxide emissions. By omitting this critical context, the advert misled consumers. This ruling is the second breach by a high street bank after HSBC faced similar scrutiny in 2022, highlighting the trend of stricter regulatory oversight on companies' sustainability claims.

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