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September 22, 2022

Regulatory Round-up: ECB on green bonds, UN’s Guterres on finance

The European Central Bank has set out details of how it aims to gradually decarbonise the corporate bond holdings in its monetary policy portfolios, on a path aligned with the goals of the Paris Agreement. All corporate bond purchases are to be “tilted” towards issuers with a better climate performance from 1 October.

Among the criteria adopted will be how companies perform compared with their peers in a specific sector as well as compared with all eligible bond issuers. Companies with more ambitious decarbonisation targets and those with high-quality disclosures will also be favoured.

Environmental group Greenpeace has launched a legal challenge against the European Commission about the inclusion of fossil gas and nuclear energy in the EU taxonomy. The labelling of fossil gas as a green fuel has also attracted a separate challenge by an alliance of environmental bodies that include Client Earth and the WWF.

US climate envoy John Kerry has called for the reform of multilateral financial institutions like the IMF and the World Bank so that they could play a bigger role in providing loans and grants to poorer countries to make the shift to a clean-energy economy and to better adapt to the impacts of climate change.

During the UN General Assembly, UN general secretary António Guterres (pictured) stressed the importance to put pressure on banks and investors as well as polluting companies to contain the climate crisis.

“We need to hold fossil fuel companies and their enablers to account. That includes the banks, private equity, asset managers and other financial institutions that continue to invest and underwrite carbon pollution,” he said.

Two-thirds of the Net Zero Asset Owner Alliance members have committed to 2025 decarbonisation targets, according to the organisation’s annual progress report and as reported by the Financial Times. This equates to additional $2.5tn in assets covered by short-term targets. The UN-convened organisation is formed by 74 institutional investors with total $10.6tn in assets.

Mark Carney, the former governor of the Bank of England, has conceded that banks feared that adhering to the rules set by his Glasgow Financial Alliance for Net Zero about lending to fossil fuel companies would expose them to legal claims, as reported by the Financial Times.

Following pressure from clients, Federated Hermes has cut ties with the State Financial Officer Foundation, an organisation that had expressed anti-ESG views and which the asset manager has been sponsoring. The asset manager, which is seen as a champion of sustainable investing, will not renew its annual sponsorship of SFOF, according to a number of news reports.

Updated with Mark Carney’s comments.

A service from the Financial Times