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In Brief: EU council on ecodesign rules; Axa and four other insurers exit NZIA

The latest news on ESG policy and regulation.

The European Council has published its position on proposals to create ecodesign requirements for consumer products. The new regulation will set environmental sustainability requirements on almost all kind of goods placed on the EU market, by establishing a digital product passport. The legislation also aims to limit the destruction of unsold consumer goods across the bloc. However, the council excludes motor vehicles from the regulation, stating that existing laws address the environmental impact of automobiles. For legislation to progress, the European parliament will now have to formulate a negotiation position. 

The European Commission has adopted a retail investment package, which aims to standardise the way information about investment products is provided to retail investors. The package also mentions providing greater clarity and insight related to investors’ growing sustainability preferences when making investment decisions.

European insurers Axa, Allianz, Scor and Swiss Re and Japan’s Sompo Holdings are the latest members to leave the Net-Zero Insurance Alliance, part of the Glasgow Financial Alliance for Net Zero, which was launched by former Bank of England governor Mark Carney ahead of COP26. Axa served at the NZIA’s chair and the new exits bring the total number of large insurers to have severed ties with the alliance to at least eight. Munich Re, Zurich and Hannover Re had quit in March and April. NZIA members had recently received a letter from US attorneys-general warning about antitrust concerns; Munich Re mentioned antitrust risks as it exited the alliance. Axa said it would “continue its individual sustainability journey, as an insurer, an investor and a responsible company”, as reported by the Financial Times. In similar news, clothing brands Selfridges and Hermès have exited the Fashion Pact, which was set up four years ago to tackle global warming, biodiversity issues and ocean degradation. 

The Science Based Targets Network has released its first corporate targets for nature, to encourage companies to incorporate nature metrics, alongside climate, in their sustainability strategies. The targets will focus on freshwater, land, ocean and biodiversity. The network said it has “proactively aligned” its guidance with existing and upcoming standards, such as the work being done by the Science Based Targets initiative and the Taskforce on Nature-related Financial Disclosures. It expects to start validating companies on their nature targets from 2024.

France is planning to introduce a tax credit for green investments to counter incentives under the US Inflation Reduction Act. The proposals brought forward by the finance ministry would provide €0.5bn annually to cover 25 to 40 per cent of companies’ capital expenditures on investments in wind, solar, heat pumps and batteries. The tax credit is made available due to Europe’s relaxing of state aid rules to counter $369bn worth of green subsidies under the IRA.

The Network for Greening the Financial System, which groups central banks and supervisory authorities, has launched a “call for expression of interest” to develop short-term climate scenarios, in addition to its existing framework of long-term climate scenarios. The network wants to establish a more precise understanding of “the adverse implications of a disorderly transition and severe natural disasters in the near future”. It is inviting modelling teams to provide sets of macro-financial variables for each scenario on a global, country and, possibly, sector scale. Submissions are welcome until June 15, with an analytical implementation expected to begin in the third quarter of 2023.

ClientEarth has announced that it has been granted a hearing at the UK High Court, following the court’s dismissal of the lawsuit the non-profit filed against the board directors of Shell. In this hearing, ClientEarth has said it will request the court to reconsider the dismissal. The group had argued that the oil and gas major’s 11 board directors were in breach of their legal duties under the UK Companies Act, by failing to implement a transition strategy in line with the Paris Agreement. 

The UK Department for Business and Trade, alongside the Financial Reporting Council, is seeking views on a revision of non-financial reporting requirements for UK companies. The call for evidence is open until August 16 and assesses whether current company size thresholds (micro, small, medium and large) are still fit for purpose. The consultation also looks at the process of preparing and filing accounts with Companies House. The non-financial reporting review sits within the general framework to “improve regulation across the board to reduce burdens and drive economic growth now that the UK has left the EU”, according to the announcement.

Meanwhile, the FRC has also started a public consultation on an updated UK corporate governance code. The revisions will particularly tackle directors’ responsibilities for internal control, risk, audit and corporate reporting. It will also aim to strengthen reporting on malus and clawback arrangements, as well as companies’ audit and assurance policies.

On carbon capture storage, the UK North Sea Transition Authority has offered 20 licences covering in total approximately 12,000 square kilometres in size. Some of the offshore sites are located near Aberdeen, Teesside, Liverpool and Lincolnshire. The government estimates that approximately 10 per cent of the country’s total annual emissions can be stored underneath the seabed, once the sites are in full operation.

The New Zealand government has launched a consultation to reform the auction settings of its emissions trading scheme. The country’s climate change commission has recommended to reduce the number of emission units for sale and the minimum price at which these are sold. The government holds auctions four times a year, where business can buy emission units or trade them on the secondary market. The consultation is open until June 16.

Elsewhere in the region, Australia’s Department of Climate Change, Energy, the Environment and Water is gathering feedback on the regulatory impact of introducing a noxious emissions standard for non-road diesel engines, such as tractors, cranes and bulldozers. The consultation is open until July 14.


A service from the Financial Times