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Regulatory Round-up: UK to miss emissions reduction goals; objections to the EU Green Bond Standard

By Victor Smart

The UK is failing to deliver on its ambitious climate targets trumpeted during its presidency of COP26 last November, according to the Climate Change Committee. In its latest report to parliament, the committee says that, despite achievements in renewable energy and electric vehicles, current programmes will miss the government’s emissions reduction goals, with the lack of progress on land use and home insulation a particular concern.

The Association for Financial Markets in Europe has warned that the EU commission, parliament and council need to go back to the original objectives for the EU Green Bond Standard in their current negotiations on the issue. A paper says that a recent parliamentary report would substantially extend the coverage of the label, which would capture all bonds marketed in the EU as environmentally sustainable. Afme fears that this would harm the EU green and sustainable bonds market. Instead its priorities are maintaining the standard’s voluntary nature and its strong link with the EU green taxonomy.

The European Securities and Markets Authority has published a report flagging issues with the ESG ratings industry. Following a consultation, Esma says common shortcomings include insufficient granularity of data and a lack of transparency around methodologies used by ESG rating providers. It also noted that the practice of issuers paying for ratings of their own products was more prevalent than expected. The European Commission is currently preparing a report on the market for ESG ratings in the EU which is expected to examine the case for regulation.

Eurosif, the European sustainable finance trade body, says regulators should bow to the fact that Sustainable Finance Disclosure Regulation categories are being used to classify the greenness of investment products. SFDR’s Article 8 and Article 9 were not originally intended to be employed as product labels but asset managers are using them in the absence of a better official alternative. Eurosif also wants a new category of products focusing on sustainability risks and opportunities.

The Taskforce on Nature-related Financial Disclosures has published a second iteration of its framework, providing a high-level structure of the metrics and target-setting approach that it plans to adopt. Financial institutions will now be invited to trial the scheme.

The European Council has adopted a negotiating position on a review of the EU Emissions Trading Scheme and the new Carbon Border Adjustment Mechanism that is at odds with that of the bloc’s parliament. The proposals have been criticised by both environmentalist groups and the industry.

A service from the Financial Times