The UK’s financial watchdog has pushed back its plans for extending its Sustainability Disclosure Requirements (SDR) and investment labels regime to suppliers of portfolio management services. The Financial Conduct Authority (FCA) conducted a consultation exercise in Q2 2024 to refine its proposals for applying a “broadly similar approach” to labelling for portfolio managers as has been adopted for fund managers. However, it no longer intends to publish finalised plans in a policy statement in Q2 2025, to ensure the extension “delivers good outcomes for consumers, is practical for firms and supports growth” of the sector. “We will continue to reflect on the feedback and provide further information in due course,” the FCA said. Portfolio management covers the management of investments via model or customised portfolios, as well as ongoing management of private market investments, primarily to wealth management clients. Firms offering portfolio management services to institutional investors can opt in to the regime. Since July 2024, fund managers have been able to apply to use one of four ‘green’ SDR investment labels – Sustainability Focus, Sustainability Improvers (focused on ‘transition’ assets), Sustainability Impact, and Sustainability Mixed Goals. The labels were introduced in tandem with an anti-greenwashing rule as well as guidance on the naming and marketing of non-labelled funds. In September, the FCA extended until April 2025 the deadline to comply with the naming and marketing rules.
Sustainable Investor
News in Brief
Funding activity for the voluntary carbon market (VCM) hit US$16.3 billion in 2024, 18 times higher than the value of all carbon credit retirements last year, according to analysis by carbon market solutions provider Abatable. Out of the US$16.3 billion of funding announced in 2024, US$7.8 billon (48%) was allocated to nature-based climate mitigation solutions, including carbon avoidance and carbon removal projects, while engineered carbon dioxide removal accounted for US$5.9 billion (38%) worth of deals. “The sustained levels of funding in 2024 clearly show the continuing strategic significance of long-term engagements in carbon credit projects, and underscores the enduring commitment of corporate buyers and large investors to the VCM,” said Valerio Magliulo, CEO and Co-founder at Abatable. “This funding activity and the shift from both suppliers and buyers towards high integrity shows a VCM laying fresh foundations for enduring transformation, and highlights the importance of carbon markets as a critical lever for climate action.” Last month, projections by data and research provider MSCI estimated that the global carbon credit market is set to grow at least fivefold by 2030 after a period of stagnation. The Abatable report credited the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) with creating 28% additional demand for carbon credits, but added that a lack of CORSIA-eligible credit supply means suppliers will need to transition fast to match the expected demand under the scheme. In the next few weeks, Abatable plans to release comprehensive CORSIA supply and demand modelling tools.
A new study by Dutch non-profit organisation Profundo shows that the costs of complying with the EU Deforestation Regulation (EUDR) are on average 0.10% of annual revenues, for large corporations and small-and-medium enterprises (SMEs). While compliance costs were found to be three times higher for SMEs than for larger corporations, they were still only 0.17% for these smaller entities. The study was commissioned with the support of the Tierra Pura Foundation. The potential impact on consumer prices would be even smaller, according to the research: between 0.0001% and 0.07%. “In comparison, this potential price increase is a fraction (between 0.05% and 3.5%) of the acceptable annual inflation target of the European Central Bank (ECB),” said the report. The ECB’s target inflation rate is currently under 2%. In a statement accompanying the report, Profundo said: “These results bring transparency to the debate on the level of costs that compliance with the EUDR and other supply chain sustainability laws would impose on large and small companies.” Last December, the European Council and Parliament agreed to delay the regulation for one year.
The newly-formed Transition Finance Council (TFC) has appointed three senior figures in sustainable finance to lead working groups supporting its core mission of making the UK a global transition finance hub. Faith Ward, Chief Responsible Investment Officer at Brunel Pension Partnership, will chair the TFC’s scaling transition finance working group; former energy minister Chris Skidmore, now Founding Partner of Demos Capital Parners, will chair its policies and pathways working group; and Vanessa Harvard-Williams, formerly chair of the Transition Finance Market Review (TFMR), will chair its credibility and integrity working group. The formation of the TFC was one of the key recommendations of the TFMR, which reported last October. It also called for the introduction of mandatory transition plans for companies and financial institutions in line with the standards of the Transition Plan Taskforce, as well as the development of a transition finance classification system. In January, the TFC announced the appointment of former business secretary and COP26 president Alok Sharma as its Chair, and Irem Yerdelen, Board Director at the Green Finance Institute, as its Deputy Chair. The remit of the TFC is to drive the implementation of the TMFR’s recommendations, support capacity building and engagement with UK and international stakeholders, and convene working groups in priority areas. “While there has been progress in many areas of transition finance, enormous untapped potential remains that could be unlocked with improved clarity and consistency. This requires a joined-up approach to policy and regulation, significant capacity-building, and close coordination with key stakeholders in finance and government,” said Ward.
Attended the first meeting of the UK’s Transition Finance Council established by @hmtreasury
I will be chairing its working group on sector pathways and policy. Further details will be announced shortly- looking forward to shaping future policy to unlock investment @cityoflondon pic.twitter.com/v6ZedRgVW6— Chris Skidmore (@CSkidmoreUK) February 13, 2025
Japanese investment firm Nomura Asset Management has launched a US$1.8 billion Global Sustainable Equity (GSE) Fund on behalf of French investment manager Caisse des Dépôts and its client, public pension fund Ircantec. The fund, which will be registered in Ireland and available to investors across multiple markets in Europe and Asia, is a tailored version of Nomura’s existing GSE fFund. Commenting on the launch, Kenichi Suzuki, Senior Managing Director at Nomura Asset Management UK, said: “We are pleased to welcome Caisse des Dépôts and Ircantec to our ever-growing pool of GSE clients.” Alex Rowe, Lead Portfolio Manager at Nomura, added: “Winning this business against such strong competition is a fantastic testament to all of the dedication the global equity team has put in over the last decade to create an approach to ESG and sustainable investment that is highly differentiated within our industry. We tailored the strategy of our core Global Sustainable Equity Fund for the client and this reflects a trend within the sustainable investment industry towards working with clients on a more bespoke, partnership basis to support individual goals and viewpoints.”
Bloomberg Intelligence’s Global 2025 Outlook has forecast sustainable investment to reach US$35 trillion in AUM in the next five years, despite a “fundamental shift”. The report predicted that in 2025 ESG investing will become more “pragmatic” and “resilient” in the face of widening backlash, weaker sentiment and increased regulatory burden, with investors heightening their focus on quantamental strategies. However, the US$35 trillion forecast is down from the US40 trillion projection in Bloomberg Intelligence’s 2024 report, revised due to 85% lower growth and market contraction in the US last year. Europe is predicted to be the largest driver of demand for ESG investments, while the US’ share of demand may fall below 20% (down from 30%) due to rising litigation risks and negative perceptions of ESG. The analysis estimates that global ESG ETF flows will rise 12.5% to US$45 billion. While well below the peak of US$160 billion in 2021, Bloomberg Intelligence stated ESG ETFs could hit US$1.3 trillion, even when accounting for 50% slower growth last year. Global sustainable debt offerings could expand to a record US$2.1 trillion this year, driven by strong green and social bond issuance. The report added that specialised products such as blue bonds, catastrophe bonds and debt-for-nature swaps could see growth. It also suggested that AI, cyber security, nature risks and water security are key themes that will demand investor attention in 2025.
Sustainability tech firm Clarity AI has partnered with Green Growth Futura (GGF), a German consultancy, to enhance their sustainable investment expertise and support asset managers. “By leveraging our advanced data and analytics, GGF can ensure that their consulting services align with global best practices, enabling them to make informed decisions that prioritize sustainability and impact,” said Philipp Kuschbert, Lead for the DACH region [Austria, Germany, and Switzerland] at Clarity AI. The partnership also will see GGF leverage Clarity AI’s data and analytics to monitor controversies, as well as exclusion criteria and to identify companies that meet their sustainability standards for their Sustainable Finance Disclosure Regulation Article 8 fund, the B.A.U.M Fair Future Fund. By using Clarity AI’s screening capabilities, GGF will ensure the exclusion of companies involved in controversial sectors, such as coal and weapons, as well as those linked to negative news in line with the UN Global Compact and Organisation for Economic Co-operation and Development frameworks. “Clarity AI impressed us with its high coverage of companies and the breadth of sustainability data collected for each company,” said Benedikt Gieseler, Head of Research at GGF. “This combination offers us a first-class basis for our subsequent qualitative research and makes us even faster, more flexible, and more efficient overall.”
Netherlands-based asset manager PGGM has acquired a 49% stake in Dutch company Carbon Collectors on behalf of its largest client PFZW. As part of the deal, PGGM acquired the exclusive right to invest up to €200 million (US$208.5 million) of equity in projects to build the infrastructure needed to collect, transport and inject CO2 into suitable permanent geological storage sites, such as depleted offshore gas fields. Carbon Collectors aims to eventually store up to six million tonnes of CO2 a year for clients in hard-to-abate industries, such as steel and cement. “With PFZW’s financial support and Carbon Collectors’ expertise, the first projects can be operational within three years of an investment decision,” said Ludo van Hijfte, CEO of Carbon Collectors. “Our flexible CO2 transport and storage approach will aid both large and smaller companies, including those outside industrial clusters, in responsibly reducing their CO2 emissions.” This transaction forms part of PGGM’s energy transition mandate set up by PFZW last year, which has made €1 billion available over the next few years for investment in young companies developing viable solutions contributing to the energy transition. “We are looking for companies that are well positioned in this respect and achieve the long-term returns we need to pay successive generations of workers in the health and social care sector a good pension,” said Simon Nicolaas, Investment Director at PGGM Infrastructure. “Carbon Collectors also contributes to PFZW’s goal of achieving a net zero investment portfolio by 2050, in line with PFZW’s commitment to the Paris Agreement.”
A group of major French asset owners and asset managers has launched an expert group to develop a methodology for measuring the effectiveness of engagement, according to the Forum Pour l’Investissement Responsable. According to the statement, ERAFP and Fonds de Réserve pour les Retraites (FRR), two French asset owners involved in pension financing, have taken the lead of the initiative. Other asset manager and asset owner members of the taskforce include: AXA IM, Candriam, CDC Croissance, Edmond de Rothschild AM, Generali AM, MAIF, Malakoff Humanis and Sycomore. The group’s aim is to create standardised tools that can be used by asset owners when engaging with companies and by asset managers as part of their engagement reports. Commenting on the initiative, Pierre Devichi, Head of Socially Responsible Investing at ERAFP, said: “Engagement is an essential lever enabling responsible investors to exert an influence on the real economy. Unfortunately, it remains difficult to measure and assess, particularly in the absence of common terminology and practices.” Mickaël Hellier, Head of SRI at FRR, added: “Engagement is one of the major pillars of the FRR’s Responsible Investment Strategy, so as to translate principles into concrete achievements in corporate practices in terms of environmental preservation, social justice and balanced governance. It is therefore necessary to evaluate the achievement of this strategic focus.”
The Global Reporting Initiative (GRI) has found that comprehensive disclosure on tax by major multinationals remains “patchy”, despite the issue growing in importance as a sustainability topic. An analysis of reporting trends by the GRI concluded that a quarter of the 1,000 largest companies in the world use GRI 207 – a global standard for tax transparency launched five years ago – in their sustainability reporting. Almost three quarters (73%) of the companies using GRI 207 entirely or partially disclosed their approach to tax, while more than half disclosed on tax governance (56%) and stakeholder engagement (54%). However, just 22% included country-by-country tax reporting in their disclosures. Europe led on disclosures, ahead of the Americas and Asia-Pacific. GRI 207 standards were applied by 67% of the oil and gas firms captured in the analysis, 57% of consumer goods and retail companies, and 52% of energy and utilities businesses. “We acknowledge that reporting is a journey and applaud these leading companies that have taken the decision to make their tax practices more transparent,” said Bastian Buck, Chief Standards Officer at the GRI. “The next step is more comprehensive and detailed reporting, which fully reflects how businesses contribute in the countries and communities where they operate. Companies that align with the disclosures in GRI 207 will be best placed not only to respond to the needs of their stakeholders, investors included, but also to get ahead of legislative changes that are increasing requirements for tax transparency.” Earlier this week, an industry group, led by the GRI, published a public letter urging UN member states to prioritise key corporate sustainability disclosures ahead of the Fourth International Conference on Financing for Development negotiations.
