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In Brief: EU parliament votes on CSDDD; NZIA exodus continues

The latest news on ESG policy and regulation.

The European parliament has voted in favour of legislation imposing human rights and environmental responsibilities on companies across supply chains. The parliament’s view on the Corporate Sustainability Due Diligence Directive is that the rules should be sector-agnostic, with the inclusion of mandatory climate transition plans. However, the European Council, which adopted its negotiation position on the matter in November 2022, is in favour of allowing member states to decide individually if financial services will fall under the scope of the directive. Now the council and parliament will begin discussions to finalise rules.

Separately, the European parliament has also voted to toughen measures against “fast fashion” in the EU strategy for sustainable and circular textiles. The European Commission proposed the strategy in March 2022 to introduce circularity across the entire lifecycle of garments and textile products sold in the bloc. 

The three European supervisory authorities (the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority) have released separate reports into greenwashing practices and the risk for market participants and consumers across the regulators’ respective areas of supervision. In their common “high-level understanding”, the authorities agreed that misleading statements can be made both intentionally and unintentionally, and within or outside the remit of the bloc’s regulatory framework.

The EBA in particular has found a “clear increase” in the numbers of potentially misleading claims by banks and other financial institutions. The ESAs had been tasked by the European Commission to assess greenwashing risks and enforcement of sustainable finance policies, which the regulators consulted on at the end of last year. 

Separately, the ESAs have also proposed regulatory technical standards for the environmental, social and governance impact of securitisation products. Under the bloc’s securitisation regulation, technical standards for ESG disclosures would be applied to securitisations where the underlying assets are residential loans, car loans and leases. The commission is now expected to endorse the technical standards in the next three months. 

The Net-Zero Insurance Alliance continues to lose members. Japanese groups Tokio Marine Holdings and MS&AD Insurance Group Holdings, alongside Spanish companies Mapfre and Grupo Catalana Occidente and Lloyd’s of London, have reportedly all left the group in recent days, after European insurers Axa, Allianz, Scor, Swiss Re and Japan’s Sompo Holdings quit the climate alliance last week. Earlier exits include Munich Re, Zurich and Hannover Re. Questions are arising over the continuation of the group, which is part of the Glasgow Financial Alliance for Net Zero — the network spearheaded by former Bank of England governor Mark Carney — now that large insurers have decided to step back.

The Science Based Targets initiative has launched a public consultation on its draft guidance for the real estate sector. The consultation is open until July 16 and aims to gather feedback on target-setting methodologies to decarbonise buildings and the entire value chain involved in their construction, including financial companies. It is estimated that the sector is responsible for more than a third of global carbon emissions.

The UK’s newly created solar taskforce has indicated in its first meeting that it intends to focus on the “untapped potential” of commercial buildings, such as schools, car parks and warehouses. The group is set to publish a roadmap with specific action plans in 2024 and has also discussed the option of “floating solar”, according to a statement. In April, the UK government unveiled its “Powering Up Britain” strategy, which includes a target of boosting solar power by nearly fivefold (to 70 gigawatts) by 2035. 

Meanwhile, non-governmental organisation Feedback has initiated a legal challenge against the UK government over the emissions impact of its trade deal with Australia, which has just entered into force. The UK-Australia Free Trade Agreement gives Australian meat producers access to the UK market, but Feedback claims that environment secretary Thérèse Coffey did not provide a satisfactory answer on the emissions impact of the trade deal. The claimants argue the overall emissions of the trade deal will have a negative impact on international climate targets.

The Australian Department of Climate Change, Energy, the Environment and Water is consulting until June 19 on a guide to estimate flooding events across buildings and infrastructure in the country. Submissions are particularly encouraged from engineers, government regulators, infrastructure managers, peak industry bodies and subject matter experts. The aim of this guidance is to manage risks deriving from intense rainfall in order to inform decision-making.

Delta Air Lines is being sued because of its claim that it is the world’s first “carbon-neutral airline”, with a class action lawsuit arguing that its offsets do not do enough to mitigate global warming, as reported by The Guardian. A Delta spokesperson told the newspaper that the claim is “without legal merit”.


A service from the Financial Times