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Regulatory Round-up: West Virginia’s ESG blacklist; GFANZ’s net zero framework release; SEC’s Goldman Sachs investigation

Six large financial groups have been warned they could be blacklisted by West Virginia – the latest US state to pass legislation targeted at banks and investors that boycott fossil fuels investments – according to The Epoch Times. It reported that the firms are BlackRock, Goldman Sachs, JPMorgan Chase, Morgan Stanley, US Bancorp, and Wells Fargo.

Last June, Texas passed a similar law barring state agencies from investing in funds that sideline fossil fuel-based energy companies. Meanwhile in Utah and Idaho, officials have criticised credit rating agencies for taking ESG factors into account.

The threatened ban by West Virginia is part of a wider conservative backlash to ESG in the US, with states that have strong fossil fuel interests seeking to counter federal-level moves action on climate change.

The Glasgow Financial Alliance for Net Zero has published a draft framework to help the financial sector support a managed phase-out of carbon-intense assets. In May, Sustainable Views revealed that GFANZ was planning to set out these components for real-world emissions reductions, which the alliance says dovetail with the US Securities and Exchange Commission’s climate disclosure proposals. 

The plans – which are designed “to catalyse action and specify concrete steps and holistic business strategy changes as part of the transition to a net zero future” – are now subject to a six-week consultation. The recommendations include setting a baseline for greenhouse gas emissions from assets, as well as establishing goals for cutting carbon, specifically in the coal, oil and gas sectors. 

Goldman Sachs is being investigated by the SEC over its ESG funds. The civil investigation regards certain Goldman Sachs funds that include clean energy or ESG in their names, according to The Wall Street Journal, which first reported the investigation. The SEC recently proposed an update to its ‘names rule’, which describes what language a fund can use to describe itself, to include ESG funds.

The European Parliament has unexpectedly rejected plans to toughen up carbon emissions rules, in a blow to the EU’s core climate policy and ambitions to establish itself as global leader on environmental issues. The decision was made by the bloc’s lawmakers against the backdrop of the war in Ukraine and rocketing energy prices. Even so, experts are hopeful that a meaningful deal can still be agreed.

Two influential European Parliament committees have also rejected plans to classify gas and nuclear energy as ‘green’ within the EU’s much-vaunted sustainable finance taxonomy. Next month, MEPs will make a final decision in a full parliament vote on whether or not the plans should go ahead. 

The Australian Securities and Investment Commission has published some basic guidelines designed to reduce greenwashing in the marketing of ESG funds. Its core message is that managed and pension funds need to stay ‘on label’ – in other words, meet consumers’ expectations derived from headline claims about products.

A service from the Financial Times