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October 13, 2023

In Brief: Momentum grows for EU social taxonomy; Japan launches carbon exchange

The latest news in ESG policy and regulation

A group of financial companies has renewed pressure on the European Commission to released a social taxonomy that would guide investment towards social housing, healthcare and education, and to ensure human rights are respected across value chains. In a letter to commission president Ursula von der Leyen, the companies, which include Triodos Bank, German church investor group AKI and the European Association of Public Banks, among others, say that the EU sustainable finance taxonomy “fails to address the social dimension of sustainability” as it “focuses on avoiding negative social impacts without giving any guidance on how sustainable investments could positively contribute to social goals,” including ensuring a just green transition.

The letter notes that the High-Level Task Force on Investing in Social Infrastructure in Europe had already estimated in 2018 a gap in social infrastructure investment of more than €1.5tn to 2030.

The European Council has reached a political agreement on developing a framework for the social economy, with the aim to increase social inclusion and labour access across the bloc. This would also include advancing the skills needed in the green transition.

The EU council has also backed the bloc’s first sustainable investment facilitation agreement. The deal between the EU and Angola aims to increase investment flows while also implementing environmental and labour standards. The agreement will also provide greater legal certainty for investors from both sides and improve accountability of public agencies. The European parliament still needs to approve the deal, as well as Angola.

Further, the council has approved the RefuelEU aviation initiative, which stimulates production, supply and demand for sustainable aviation fuels. It previously already passed similar legislation for the maritime sector. The council also formally adopted revisions to the Renewable Energy Directive, which will see the share of renewable energy increase by up to 45 per cent by 2030. The two laws are the last ones to cover the bloc’s “Fit for 55” emissions reduction package.

The European Securities and Markets Authority has published an analysis on the potential environmental, social and governance pricing benefit (the so-called “greenium”) of different sustainability-labelled debt instruments. The regulator states that it cannot confirm the existence of a “systematic” pricing advantage for any of these debt instruments, but that ESG credentials have spurred a “statistically significant” pricing benefit for ESG bond issuers.

Brussels is working on an investigation against Chinese steelmakers’ subsidies, according to the Financial Times. The move would be spurred by the US and in return the two allies would not resume tariffs on each other’s imports. Last week, the bloc confirmed it is launching an investigation into Chinese electric vehicle subsidies.

The French government has decided to scrap its “say on climate” law from its green industry bill. It would have obliged all listed companies to submit a climate strategy for shareholder approval at annual meetings every three years, although the voting would not have been binding.

The UK’s Transition Plan Taskforce has published its disclosure framework to assist large corporations with their climate transition plans. The country is considering mandating transition plans in corporate reporting.

The UK government has also released its 2024 auction calendar for emission allowances under its trading system. Available allowances will be reduced to 69mn, a fall of 12.4 per cent compared with this year.

Japan’s carbon credit market has started trading on the Tokyo Stock Exchange, local media reports. A complete version of Japan’s emissions trading system will commence in 2024.

California governor Gavin Newsom ratified the state’s Voluntary Carbon Market Disclosures Act but vetoed the Voluntary Carbon Offsets Business Regulation Act, which would have imposed liability on misleading offset claims.

The International Financial Reporting Standards Foundation has published its “blackline” revisions to the Sustainability Accounting Standards Board’s standards. The revisions were made following stakeholder consultation on their international applicability and are not final until a proposed ratification in December.

The UN-backed Green Climate Fund, which provides developing countries with financial assistance in enhancing climate resilience, has raised $9.3bn in contributions in its latest funding round, less than the $10bn achieved in its 2019 fundraising.

The US Environmental Protection Agency has announced new targets to reduce the use of hydrofluorocarbons, which are highly polluting greenhouse gases present in refrigeration, heating and cooling systems. Under the American Innovation and Manufacturing Act, the government will aim to cut 40 per cent of HFCs from 2024 and 85 per cent by 2036. The new commitments come after the US signed the ratification of the Kigali Amendment, an international agreement to gradually phase down HFCs from consumption and production. Last week, the EU parliament and European Council reached a similar agreement to align with the bloc’s goal of reaching net zero by 2050.

An investigation by The Guardian has revealed that some UK and US companies’ social audits in subsidiaries abroad lack integrity. The proposals under the EU’s Corporate Sustainability Due Diligence Directive would impose fines and sanctions on similar malpractices.

ExxonMobil has announced its largest transaction to date, by acquiring shale oil company Pioneer Natural Resources in a $59.5bn deal, in a move that signals a boost for oil production rather than a shift to renewable energy.

 

A service from the Financial Times