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September 1, 2023

In Brief: UN targets Saudi Aramco lenders; Brazil resumes climate change fund

The latest news in ESG policy and regulation.

UN human rights experts have sent letters to Saudi Aramco and its lenders, warning that their corporate actions may be in violation of human rights due to their impact on climate change. JPMorgan Chase, Citi, HSBC, SMBC Group, Crédit Agricole, Morgan Stanley, BNP Paribas, Goldman Sachs, Mizuho Financial Group and Société Générale are among the international banks targeted. Saudi Aramco is one of the most profitable global companies, but is also a main emitter of carbon emissions due to its oil and gas activities. The UN experts argue that the company may be in breach of a UN resolution that states people have a right to a clean, healthy and sustainable environment. The letters were sent in June and come after non-governmental organisation ClientEarth commenced legal proceedings against Saudi Aramco in 2021, accusing the fossil fuel giant of climate-related human rights breaches.

The Net-Zero Asset Owner Alliance has opened its fourth public consultation on its target-setting protocol. Updates to the fourth edition involve asset class expansions into private debt funds, real estate debt funds and sovereign debt holdings. Feedback is accepted until September 29. The alliance is part of the Glasgow Financial Alliance for Net Zero, founded by former Bank of England governor Mark Carney, which has the overall aim to channel private money to the green transition. It counts 86 members at present, after pension funds Cbus, Bundespensionskasse and the Church of England recently left the alliance.

European Commission president Ursula von der Leyen has proposed Dutch politician Wopke Hoekstra as successor to Frans Timmermans, who was the commissioner in charge of the European Green Deal. Timmermans officially resigned from his position last week to focus on his candidacy in the upcoming Dutch elections. Hoekstra currently serves as the Dutch foreign affairs minister. He previously held the role of minister of finance from 2017 to 2022.

The UK government has published guidance regarding its approach and timeframe for monitoring and reporting public sector emissions. The government has a goal to reduce direct greenhouse gas emissions from public sector buildings by 75 per cent by 2037, based on a 2017 baseline. The Department for Energy Security and Net Zero will be in charge of developing policy in this area and expects to publish guidance in 2025. The policymaking process will also give “due regard” to other existing or planned emissions reporting policies and initiatives, according to the statement.

The UK Sustainable Investment and Finance Association has cautioned UK prime minister Rishi Sunak against wavering on his government’s commitment to climate action, with the organisation spearheading a coalition of 36 financial institutions. Its letter, which includes Jupiter Asset Management and Aegon Asset Management among its signatories, warned that “without long-term clarity from government, the £50bn-£60bn per year of investment needed to reach net zero won’t happen”.

The Pensions Regulator has issued guidance to UK pension trustees on how to make their climate scenario analysis “decision-useful”, following criticism earlier this year over the integrity of these scenarios. The watchdog said that “a degree of revolution, not evolution” is required in response to shortcomings in current climate models, and urged trustees to challenge their advisers. It added that while trustees need not be climate experts, they should seek training in order to attain “an appropriate level of knowledge”.

The UK government plans to relax regulations originating from the EU concerning nutrient neutrality, which were designed to limit the pollution of bodies of water. The government said that the replacement of these “defective” rules will allow 100,000 more houses to be built, arguing that while “nutrients entering our rivers are a real problem”, new homes’ contribution to this issue is “very small”. The move was condemned by the Royal Society for the Protection of Birds.

Brazil has resumed its national fund on climate change with a value of R$10bn ($2bn), which will finance mitigation and adaptation projects in the country. The fund’s budget “may come from the first issue of sustainable sovereign debt by the Brazilian government”, according to a press release by the Ministry of Environment and Climate Change. The fund has been active since 2011 but experienced a decline during the Bolsonaro government. Last year, Brazil’s supreme court ruled that the federal administration had failed to ensure the allocation and use of the fund. As part of this case, the supreme court also granted the Paris Agreement “supralegal” status in the country, meaning it prevails over other ordinary laws and regulations.

The country’s Amazon Fund has also received extra funding, following a R$110mn donation from Denmark. The UK and the US had also previously announced new contributions to the fund, which aims to tackle deforestation and improve sustainable development.

The Australian government has opened a consultation on its implementation plans regarding the revisions to the country’s carbon credit market. An independent review previously made 16 recommendations to enhance the governance of the country’s carbon credit scheme, following allegations that some carbon offsetting projects were not genuinely generating emissions reductions. Submissions will be accepted until October 3 2023.


A service from the Financial Times