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October 20, 2022

Regulatory Round-up: FSB, G7 stress urgency of climate disclosures; investors consider climate litigation against VW

The Financial Stability Board has published two reports on climate-related disclosures explaining that encouraging progress has been made in the last year. But both the 2022 TCFD Status Report: Task Force on Climate-related Financial Disclosures and the Progress Report on Climate-related Disclosures say that, until the International Sustainability Standards Board’s global baseline is agreed, there is a continuing need to maintain momentum by monitoring and reporting on progress in firms’ climate disclosures. The FSB has asked the TCFD to publish a further status report next year, reviewing disclosures by companies in their public reporting for 2022.

The European Securities and Markets Authority, the EU’s financial markets supervisor, has set enabling sustainable finance as one of its strategic priorities. In its new Strategy for 2023-2028, Esma says it will also focus on strengthening supervision, protecting retail investors, fostering effective markets and financial stability and facilitating technological innovation and effective use of data.

A commissioner of the US Securities and Exchange Commission, the recently appointed Jaime Lizárraga, has said that the regulator must do more to promote diversity and inclusion within the organisation and the wider asset management industry. He urged the Commission to decide on recommendations made by the SEC’s own Asset Management Advisory Committee which would, for example, establish a centralised mechanism for cataloguing discriminatory practices in the securities industry. Both Lizárraga and Amac cite an official estimate that fewer than 1 per cent of global assets under management are managed by firms owned by women or minorities.

G7 finance ministers and central bank governors have formally reiterated their commitment to “ambitious climate action and to promoting an orderly and just global transition” to net zero towards net zero.  A statement issued after a meeting in Washington last week affirmed support for the introduction of mandatory climate-related financial disclosures that provide consistent and useful information for market participants. It also welcomed the global baseline of sustainability reporting standards currently under development by the International Sustainability Standards Board. 

Thirty-five investors with assets worth over $5.7tn have formed “a new alliance committed to building healthier, fairer societies” by focusing on health outcomes of workers, consumers and communities through their investments. The Long-term Investors in People’s Health initiative is led by ShareAction and supported by The Health Foundation and Guy’s & St Thomas’ Foundation. It includes asset managers and asset owners across the UK, America, Japan, and the Netherlands such as Legal and General Investment Management, Schroders, Hermes Investment Management, Mitsubishi UFJ Trust and Banking Corporation, the Local Authority Pension Fund Forum, and American Century Investment Management.

Five Swedish and Danish public pension funds and the Church of England Pensions Board are considering litigation against Volkswagen over its lobbying activities related to climate change, as reported by the Financial Times. The investors say that the German carmaker isn’t answering questions about these activities and fear it may be lobbying against tougher climate rules while “publicly championing the green transition”.

The Financial Times also reported that a group of financial institutions including the world’s biggest asset managers, BlackRock and Vanguard, has told the UK’s Environmental Audit Committee that they will continue to invest in fossil fuels as they believe that climate change plans do not require to end such investments. The committee had asked members of the Glasgow Financial Alliance for Net Zero, of which the two asset managers are part, to explain how their fossil fuel investments may affect the UK’s environmental goals. BlackRock responded that its “role in the transition is as a fiduciary to our clients — it is not to engineer a specific decarbonisation outcome in the real economy.”




A service from the Financial Times