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In Brief: EU parliament approves methane legislation; UK joins Amazon Fund

The latest ESG regulatory and policy news.

The European parliament has agreed on new legislation to reduce methane emissions from the energy sector, in line with the bloc’s climate ambitions. It follows the recommendations by the parliament’s environment and industry committees, which already demanded the European Commission set by 2025 a binding 2030 reduction target for EU methane emissions. Parliament is asking for more regular leak detection and repair surveys, and for member states to set national reduction targets as part of their energy and climate plans. Crucially, parliament also wants imported fossil fuel energy to adhere to the new rules, given that more than 80 per cent of oil and gas in the EU derives from imports. Negotiations will now start with the European Council to agree on a final text.

The European parliament has also voted on legislation to ban generic environmental claims and enhance product labelling and durability. This echoes a similar stance taken by the council last week. Discussions between the two institutions can now start on a new “green claims directive” aimed to protect consumers.

The EU Platform on Sustainable Finance has recommended to exclude the option of biodiversity offsets in its feedback to the European Commission’s proposed regulation on a new set of EU taxonomy criteria. Biodiversity is one of four environmental objectives that still need to be transposed under the taxonomy. The others are the protection of water and marine resources; a circular economy; and pollution prevention and control. The UN-backed Principles for Responsible Investment has agreed with the stance taken by the PSF.

The UK government has announced it will contribute £80mn to the Amazon Fund, following a meeting between Prime Minister Rishi Sunak and Brazilian president Luiz Inácio Lula da Silva, who was in London to attend the coronation of King Charles III. The move was anticipated earlier this year, with other countries pledging further funding. The US had previously announced a $500mn contribution to the fund.

The UK government is planning to give the North Sea Transition Authority more powers and turn it into a “carbon storage regulator”, by amending the energy bill. Companies with a licence to drill in the North Sea would have to report their findings to the regulator so as to create a “treasure map” of carbon capture storage opportunities underneath the seabed. The goal is to encourage private investment by mapping the potential storage space available for carbon capture. 

The US Environmental Protection Agency has published new carbon pollution standards for coal and natural gas-fired power plants. It proposes to strengthen standards for newly built fossil fuel-fired stationary combustion turbines; to set emission guidelines for existing fossil fuel-fired stationary combustion turbines; and to establish emission guidelines for states in order to limit carbon pollution. The regulator says that power companies should be able to implement the new standards with a “negligible impact” on electricity prices. It also estimates these measures can deliver up to $85bn in climate and public health benefits over the next two decades and are equivalent to reducing the annual emissions of roughly half the cars across the country.

Ecuador has signed the largest debt-for-nature swap to date, resulting in a $656mn bond facility to protect the conservation of the Galápagos Islands. The bond will need to be repaid over the next 18 years and will provide investors with a 5.6 per cent coupon. The bond was structured by Credit Suisse, which bought $1.6bn worth of Ecuadorian sovereign debt and repurposed it into the “Galápagos Marine Bond”. The bank, prior to the forced merger with UBS, had become one of the key players in this market structuring similar deals for Belize and Barbados.

Indonesia is set to launch its carbon exchange later this year, allowing foreign companies to purchase credits to offset their emissions. The carbon credits would be allowed to be bought and sold exclusively on the country’s own carbon exchange and not on other exchanges, according to media reports.

The Australian government is forming a Net Zero Authority to support workers, companies and investors throughout the country’s green transition. In particular, the authority will assist in re-skilling workers across high-emitting sectors, support regions in attracting climate-friendly investments and connect investors and corporates with a goal to capitalise on net zero opportunities.

The International Sustainability Standards Board has opened two new consultations this month. The first is asking stakeholders for feedback on its mandate for the coming two years, including which sustainability-related topics and issues to prioritise. The second is seeking feedback on its methodology to increase the international applicability of the Sustainability Accounting Standards Board standards, which assist companies in reporting on sustainability-related risk and opportunities impacting their enterprise value and balance sheet.

A group of 34 banks has formed a new working group under the UN Environment Programme Finance Initiative to establish nature target-setting for banks. The group should be aligned with existing efforts under the Kunming-Montreal Global Biodiversity Framework (adopted last December) and guidelines set by the Taskforce on Nature-related Financial Disclosures. The lead banks in the project are Crédit Agricole, First Abu Dhabi Bank and UBS Group.

French lender BNP Paribas has announced it will cease to finance new gas fields, in addition to its existing commitment to halt the financing of new oil fields. In January, the bank said it will cut financing for oil exploration and production by 80 per cent by 2030, with the equivalent target for gas exploration and production set at 30 per cent. Non-profit Reclaim Finance warned that the measures are not sufficient to align BNP Paribas with the International Energy Agency’s 1.5°C scenario projections, and noted that the bank had not yet committed to stop financing liquified natural gas stations, unlike Dutch rival ING.

 

 

A service from the Financial Times