The Acting Chair of the US Securities and Exchange Commission (SEC) has indicated his intention to delay and potentially roll back a proposed rule requiring climate-related financial risk disclosures from publicly listed companies. Mark Uyeda requested the US Court of Appeals for the 8th Circuit to halt any scheduled arguments on the regulation until the commission had determined appropriate next steps, noting his previous opposition to the “deeply flawed” rule. He said that the SEC’s previous briefs submitted under former chair Gary Gensler, which defended the rule, do not reflect his views. “I continue to question the statutory authority of the commission to adopt the rule, the need for the rule, and the evaluation of costs and benefits,” Uyeda said. He said a delay to legal proceedings against the rule is warranted, given the recent change in the composition of the commission, and President Donald Trump’s memorandum regarding a regulatory freeze. “The SEC has full legal authority to require climate risk disclosures to protect investors and improve market transparency,” said Ben Cushing, Sustainable Finance Campaign Director at Sierra Club, noting that the SEC is an independent regulatory agency. “Rescinding this rule would be a significant setback, further isolating the US on the global stage as climate-related financial risks continue to grow.”
Sustainable Investor
News in Brief
The Science Based Targets initiative (SBTi) has announced that it will be seeking additional comments on five core areas as part of the revision of its Corporate Net Zero Standard. The initiative has established expert working groups to consult on the five topics and is intending to issue a second public consultation in March. The proposed changes will include clarity on tailoring requirements based on company size and geography, measures to help companies monitor progress and transparency, better target-setting for value chain (Scope 3) emissions, support for reducing residual emissions through interim targets and alignment with other SBTi standards. “Reaching net zero is never going to be straightforward. But the guidance to get businesses there should be. The additional consultations announced today will support the development of a revised Corporate Net Zero Standard that works for businesses and accelerates climate action,” said Tracy Wyman, SBTi’s Chief Impact Officer. SBTi’s first Corporate Net Zero Standard was launched in 2021, at a time when, according to SBTi, there was no consistent definition of net zero in corporate climate target-setting. “We have come a long way since then – today more than 1500 businesses have net zero aligned targets,” said Alberto Carillo Pineda, SBTi’s Chief Technical Officer. “The feedback we have gathered since the release of the first version of the standard has been invaluable in helping us identify opportunities to strengthen it.” SBTi appointed a new CEO, David Kennedy, at the start of this year. His predecessor, Luiz Amaral, stepped down in 2024 amidst controversy over plans to allow use of carbon credits to offset Scope 3 emissions.
Sustainable finance and corporate reporting-focused bodies have published a public letter urging UN member states to prioritise key corporate sustainability disclosures ahead of the Fourth International Conference on Financing for Development (FfD4) negotiations. The group, led by the Global Reporting Initiative (GRI), explicitly called for the retention of double materiality-focused reporting in the ‘Zero Draft Outcome’ document, asking governments to adopt disclosure requirements of both GRI and the International Sustainability Standards Board (ISSB) in parallel. The letter makes a case for harmonised standards, noting they can expand market access, strengthen financial stability, reduce costs and underpin competitiveness. “Now is the time to strengthen the foundations of a global sustainability reporting system that serves businesses, society and the environment,” said Peter Paul van de Wijs, GRI’s Chief Policy Officer. “By upholding corporate transparency provisions in the FfD4 negotiations, governments can ensure that sustainability reporting is an enabler for mobilising capital for development.” Other signatories of the letter include CDP, the Danish Institute for Human Rights, GSG Impact, and the World Benchmarking Alliance. The FfD4 negotiations are set to take place in June. They will focus on evaluating progress on past financing for development commitments, addressing emerging challenges, and exploring reforms of the international financial architecture to increase alignment with the UN Sustainable Development Goals. “A clear, interoperable framework based on the requirement for companies to comprehensively report on their impacts, risks and opportunities – or, as the UN call it, double materiality – will empower markets, support responsible investment and align capital with sustainable and inclusive growth,” said van de Wijs.
The UK Financial Reporting Council’s Stewardship Code has reached 297 signatories, the week before its consultation on the code closes. The code’s signatories comprise 199 asset managers, 77 asset owners and 21 service providers, which represent £52.3 trillion (US$64.7 trillion) in AUM. This is an increase from the 289 signatories and £50.3 trillion in AUM when the list was last updated in July. “It’s great to see the number of signatories to the UK Stewardship Code continuing to grow and even better to see that some have already begun to apply the measures we introduced last summer, which has had the desired outcome of shorter reports,” said Mark Babington, Executive Director of Regulatory Standards at the FRC. The FRC is currently consulting on revisions to the 2020 edition of the Stewardship Code, with the consultation closing on 19 February. The FRC plans to publish an updated code that will come into effect in 2026. The consultation has introduced five principles for a revised code, including a new stewardship definition focused on long-term value, a more streamlined reporting process, targeted principles for different signatories such as proxy advisors, and guidance to aid the implementation of updated reporting requirements.
Long-term climate risks facing 31 meat, dairy and feed production companies could cause losses to the tune of US$5.4 trillion, according to a report from sustainability research provider Profundo. The three largest US-based lenders to the sector (Bank of America, Citigroup, and JP Morgan Chase) could face costs of US$9.3 billion in 2025 as a result of these risks, the research found. Looking to the near term, these firms face losses of US$116 billion between now and 2030. According to the report, the big three could reduce climate-related financing risk by 83% to 95% if they stopped financing these 31 corporations in the near term. The research considered variables such as deforestation impacts, methane and other greenhouse gas emissions, water scarcity, and weather volatility-related risks in key supply chain regions. “This analysis highlights the opportunity for financial institutions to reduce long-term financial risks through reducing their investments in the meat, dairy and feed sector,” said Gerard Rijk, Senior Equity Analyst at Profundo. “The analysis and the numbers are a wake-up call: continued investment in this unsustainable industry creates very high externalized climate damage costs as well as potential high cash costs. These hurt the planet as well as the portfolios of banks and asset managers.” The report did not include financial risks related to biodiversity loss, the impact of meat and dairy production and consumption on human health, and the impact on human rights. However, the report said that these additional financial damages and risks would “further escalate the total financial risks”.
The European Association for Investors in Non-listed Real Estate Vehicles (INREV) has announced the formation of a focus group to support the integration of ESG factors into real estate investment valuations and underwriting. The group comprises senior experts across investment managers, institutional investors, valuers and the Big Four accountancy firms, including PGGM, CBRE Investment Management and DWS. Members aim to drive greater consistency on how ESG data and assumptions are incorporated into value estimations across the real estate industry. They will also develop a framework of ESG factors that should be considered in underwriting real estate investments. The framework will target challenges such as how investors can reduce the risk of double counting. “Investors and managers across Europe are setting ambitious ESG strategies, however they struggle to translate those strategies into tangible financial outcomes,” said Constantin Sorlescu, INREV’s Director of Professional Standards. “[The group] comes as a direct response to growing demand from the industry for greater clarity on the impact of ESG in real estate underwriting. Our ultimate aim is to move the industry beyond theoretical discussions to a more tangible, numbers-driven approach for ESG valuations.”
South Korea’s Financial Services Commission (FSC) has proposed expanding the scope of the country’s Stewardship Code to improve the implementation and effectiveness of the code. Changes would include extending the scope of trustee responsibility and the targeted asset base, as well as strengthening compliance checks. “The Stewardship Code has a significant impact on the overall capital market and companies,” FSC Vice Chairman Kim So-young said at a seminar. “Improvements must be made so that it can reflect market changes and the needs of general investors in a timely manner in order to enhance trust in the capital market.” He highlighted the importance of ensuring institutional investors periodically check and disclose their compliance with the code to boost trust among investors. Since the code was introduced in 2016, 239 institutional investors and 133 asset managers have become signatories.
Sustainable funds represent 19% of the European investment fund market, with Europe holding 85% of global sustainable funds’ net assets, according to a report from the Association of the Luxembourg Fund Industry (ALFI). The third edition of the European Sustainable Investment Funds Study, produced in partnership with Morningstar and Tameo, found that the net assets of sustainable funds in Europe totalled €2.2 trillion (US$2.3 trillion) at the end of 2023. The data shows that the European investment fund market has more than tripled from 6% in 2019. The average size of sustainable funds also increased, reaching €416 million in 2023. “Europe continues to lead the global sustainable investment fund market, driven by a robust regulatory framework, including the SFDR, and strong investor demand,” said Britta Borneff, Chief Marketing Officer at ALFI. “The study highlights both the growth and resilience of Europe’s sustainable investment funds. We hope these insights support decision-making, drive progress in sustainable finance, and help build a more sustainable and equitable future.” However, the report also found that the number of new sustainable funds launched has been declining. In 2023, 350 new sustainable funds were introduced, down from 616 in 2022 and 760 in 2021.
Data and research provider Sustainable Fitch has said that the failure of “varied ambition and consistency” in taxonomies in Southeast Asia is hampering the widespread adoption of sustainability goals. The report said this will likely drive the market to coalesce around one or two standards. There are presently four taxonomies in the region: one in Singapore, one in Thailand, one in Indonesia and one that covers the ten member countries of the Association of Southeast Asian Nations bloc. In its report, Sustainable Fitch said that significant inconsistencies in the region are seen across coal – a vital energy source for many markets in Southeast Asia – as well as transition criteria for electricity generation from bioenergy power, geothermal energy and hydropower. “The application of transition taxonomies has been slow, even with improved guidance,” the report read. “Limited uptake could be attributed to the high benchmarks required for activities to qualify as transitional and access financing. Reputational risk may also deter companies from pioneering adoption, wary of being perceived as greenwashing.” Transition taxonomies aim to guide industries in reducing greenhouse gas emissions and to shift to more sustainable practices. Though some guidance has emerged in recent years, it remains limited. This has prompted Asian countries, including several in Southeast Asia, to develop their own taxonomies to capture and support nuanced transition efforts suited to local contexts.
Manulife Investment Management’s Forest Climate Fund has reached third and final close at US$480.1 million, supported by investments from global institutional investors. The fund aims to offer investors the opportunity to diversify their portfolios with sustainably-managed forestland assets, and has targeted the sequestration of more than six million tons of carbon dioxide. “We have seen strong interest in the forest climate strategy from a broad base of global investors, further highlighting the acceptance and growing use of forestland as a climate change mitigation tool that has added new dimensions to timberland investment,” said Tom Sarno, Global Head of Timberland Investments at Manulife. A further objective of the strategy is to establish new forests through afforestation or reforestation to generate high-quality carbon credits and long-term sustainable timber value. Commitments to the fund have come from a diverse range of sources including US investors, corporates and global institutional investors. The fund has so far acquired more than 150,000 acres and is approaching 50% deployment. Manulife’s team has also identified a pipeline of additional opportunities in 2025 to further diversify and grow the portfolio. “Investors are showing confidence in forests as a top natural climate solution,” said Eric Cooperstrom, Managing Director, Impact Investing and Natural Climate Solutions at Manulife. “With the interest we have seen in the fund, we will continue to pursue natural climate solutions to drive new opportunities for impact and results for our clients.”
