The Global Reporting Initiative’s (GRI) 2024 ‘Carrots & Sticks’ report has found continued growth in ESG and disclosure policies, highlighting the addition of 214 new policies globally in the last year. The Carrots & Sticks database now includes 2,677 ESG and sustainability policies – a 9% increase since 2023. Disclosure polices account for more than half of total sustainability policies at 1,421. The database outlines related legislation from 133 countries, almost doubling from 88 in 2020. The report noted a shift in policies classified as mandatory and voluntary, with mandatory policies falling from 44.8% to 42% and voluntary policies rising to 58%. The number of both voluntary and mandatory disclosure policies saw a decline between 2023 and 2024. According to the report, the GRI is referenced in 18% of ESG regulations globally. “The latest Carrots & Sticks findings highlight an increasing focus by governments and regulators towards legislative measures that encourage companies to address global sustainability challenges, alongside recognition of the role of transparency, including for supply chain impacts, in driving effective decisions by all stakeholders,” said Peter Paul van de Wijs, GRI’s Chief Policy Officer. “However, to drive meaningful progress, a transition to robust mandatory policies is essential, complementing the predominantly voluntary disclosure landscape we see today.” Last week, GRI and non-profit CDP signed a memorandum of understanding at COP29 in Azerbaijan, furthering their collaboration to streamline environmental reporting.
Sustainable Investor
News in Brief
The California Public Employees Retirement System (CalPERS) has committed US$53 billion toward investing in climate-focused solutions. The asset owner identified US$47 billion in existing climate-focused investments in November last year and has since made US$3.6 billion in related investments across private equity and infrastructure. The firm is reviewing an additional US$3.2 billion in climate-related investments, which could be finalised over the coming months. “The energy transition represents one of the biggest investment opportunities in history,” said CalPERS CEO Marcie Frost. “We are providing the capital necessary to plant the seed for the low-carbon economy of the future.” Climate solutions funded by CalPERS over the past year include increasing its stake in UK-based renewable energy company Octopus Energy. This follows the launch of the asset owner’s US$100 billion Climate Action Plan, which forms part of its Sustainable Investments 2030 Strategy. The strategy seeks to reduce investment risks by halving the fund’s portfolio emissions by 2030 and reach net zero by 2050. “We believe that making sound, long-term investments in climate solutions will generate outperformance while also providing the clean energy needed to meet the increased demands that people have for their homes, cars and technology,” said CalPERS Chief Investment Officer Stephen Gilmore.
CalPERS Climate Solution Commitments Surpass $53 Billion: https://t.co/gULe2VUmn7 pic.twitter.com/8LttfC6slS
— CalPERS (@CalPERS) November 19, 2024
ESG data provider Iceberg Data Lab has unveiled a tool which lets investors measure the annual contribution of portfolio companies to deforestation. At launch, the new service will be able to provide data on the forest area destroyed per year by 3,500 listed firms, producing seven key commodities – beef, cocoa, timber, coffee, soy, palm oil and rubber – in 22 countries vulnerable to deforestation. By early January 2025, the tool will cover 8,000 companies. Iceberg Data Lab said its new tool studies the production of raw materials by country, aggregating country-specific data to calculate the contribution of companies to deforestation. This individual contribution is then weighted according to the certifications used by the company, with Iceberg independently judging the reliability, traceability, completeness and relevance of these. If a certification only partially considers the prevention of deforestation, a ‘mark-down’ is applied to account for residual deforestation risk, while any certifications found to be insufficiently transparent or reliable are excluded. The tool factors in production-related differences, noting that arabica and robusta coffee both consume a significant amount of water, but their effects on forests and local biodiversity differ depending on ecosystem. Because Iceberg measures the average deforestation rates by commodity and by country for a specific sector, the tool can compare a company with the sector average, and assess its performance compared to peers. At COP16 in Colombia, the International Union for Conservation of Nature reported that 38% of the world’s trees are at risk of extinction.
Global asset manager Fidelity International has confirmed plans for three of its funds to adopt the Sustainability Focus label under the UK’s Sustainability Disclosure Requirements (SDR). Finalised in November last year, the Financial Conduct Authority’s SDR naming and marketing rules for green funds mean UK-domiciled products that use terms such as ‘sustainable’ and ‘impact’ in their names must comply with the terms and conditions of one of four SDR labels – ‘focus’, ‘improvers’, ‘impact’ and ‘mixed goals’. The three Fidelity funds – Fidelity Sustainable UK Equity Fund, Fidelity Sustainable Global Equity Fund and Fidelity Sustainable European Equity Fund – have a combined AUM of more than £865 million (US$1.1 billion). The funds aim to increase the value of investments over a period of five years, with 70% or more of the gross assets invested in companies which contribute to environmental and/or social outcomes. The Sustainability Focus label is primarily for products investing in assets that are sustainable for people and/or the planet, requiring at least 70% of assets meet a credible standard of environmental and/or social sustainability, or align with a specified environmental and/or social sustainability theme. If approved, Fidelity would become the first firm with three SDR labelled funds. Last week, two EdenTree Investment Management funds received a Sustainability Impact label, while earlier this month a Ninety One fund was granted use of the same label. “We welcome the introduction of SDR and see it as an important stage in the development of sustainable investing in the UK, giving investors greater confidence to allocate to sustainable funds,” said Jenn-Hui Tan, Chief Sustainability Officer at Fidelity. “We believe the Sustainability Focus label aligns well with the established investment approach of these funds and builds on our approach to managing Sustainable Finance Disclosure Regulation Article 9 funds for European investors.”
The UK government has published new materials that aim to bolster the integrity of voluntary carbon and nature credit markets. Alongside new principles to underpin market integrity, the government has outlined a process to ensure their implementation, including a 2025 public consultation to determine how they can support the UK’s domestic and global climate and nature goals. “Companies and investors need clear signals that taking action and being ambitious on climate using voluntary carbon markets (VCMs) is supported and recommended by policymakers, and that is what the UK government is providing,” said Mark Kenber, Executive Director of the Voluntary Carbon Markets initiative (VCMI). The UK principles explicitly incorporate biodiversity and nature-based solutions, aim to tackle misleading terminology – such as ‘carbon neutral’ – and mandate sustainability reporting for credit use, such as project-level disclosures. In addition, the International Organization of Securities Commissions (IOSCO) has issued its final report on 21 best practices for promoting the financial integrity and orderly functioning of VCMs. These practices are divided into four focus areas: regulatory frameworks, primary market issuance, secondary market trading, and use and disclosure of carbon credits. Meanwhile, the Integrity Council for the Voluntary Carbon Market (ICVCM) has approved three methodologies for issuing high-integrity carbon credits for reducing emissions from deforestation and forest degradation (REDD+) in developing countries for its Core Carbon Principle (CCP) label. REDD+ credits generated from these projects are expected to start issuing CCP labels from early next year. “There is no chance of meeting our climate and biodiversity goals without increased finance for nature, Indigenous Peoples and local communities,” said Amy Merrill, ICVCM’s CEO.
Stewardship platform vendor Esgaia has introduced its Vote Disclosure Service (VDS) to improve the transparency of investors’ vote reporting, aiming to offer a “cost-effective and dynamic alternative” to leading proxy voting firms. VDS is designed to help users meet compliance and best practice disclosure standards more efficiently, enabling asset managers and institutional investors to automate the disclosure of key voting data directly on their websites. Esgaia said current disclosure practices are falling behind expectations at a time of increasing regulatory and stakeholder requirements on voting transparency, including the provision of access to data in timely and digestible formats. Existing processes are often fragmented and manual, it added, with investors disclosing vote summaries in annual stewardship reports, holding individual records in separate detailed lists, and disclosing votes on websites or using the disclosure services of proxy voting providers. Esgaia said VDS would allow investors to reduce administrative tasks by streamlining the structuring, preparation and reporting of voting data, thus fulfilling regulatory requirements and enhancing best practice disclosure. Use of the service would help to build trust by strengthening accountability with clients and beneficiaries, it said. Other key features of VDS include quick implementation, the ability to display data on multiple websites, filters on voting data, availability of custom data on ESG topics, and detailed meeting information.
Financial think tank Planet Tracker has argued there is “no financial justification” for the “irreversible” environmental damage caused by deep-sea mining (DSM). In a new report evaluating the financial versus environmental impacts of DSM, as the International Seabed Authority (ISA) mulls allowing the activity in international waters, Planet Tracker found that DSM provides “minimal” financial benefits for countries which are far outweighed by negative impacts on the planet. The organisation has urged investors and governments to back a moratorium on the practice, with the report noting growing opposition to DSM. Even in a best-case scenario, countries would only earn up to US$6.25 million each in annual corporate income tax, which Planet Tracker branded an “insignificant contribution to government revenues for almost all countries”. The ISA has 170 Members, including 169 Member States and the EU, with states likely to only receive a small amount of royalties from DSM between US$42,000 and US$1.1 million each per year. The report warned that the negligible financial benefits would be on top of negative impacts on the ocean, climate, natural capital, and investor returns caused by DSM. Planet Tracker has also released a separate report which found that DSM will negatively affect countries that mine copper, cobalt, nickel and manganese on land, collectively risking more than US$560 billion in annual export earnings per year.
🌊Our latest report analyses the taxes and royalties countries could receive, revealing insignificant economic returns. There is no financial justification for deep sea mining, yet the environmental impact is vast. Learn more: https://t.co/bx4EpgmsFn pic.twitter.com/TXA2TugL7T
— Planet Tracker (@planet_tracker) November 14, 2024
As part of her 2024 Mansion House speech, UK Chancellor of the Exchequer Rachel Reeves unveiled a consultation to collect views on the need for a national Green taxonomy. Already introduced in several jurisdictions, taxonomies define economic activities aligned with sustainability goals across multiple sectors, providing guidance to corporates and investors, and mitigating greenwashing. “However, the government is aware that taxonomies can be complex in practice, and feedback on their value is mixed,” a government statement said. The consultation asks for feedback on whether a UK taxonomy would be “additional and complementary” to existing sustainable finance policies, but not on specific economic activity-level standards. Interoperability with other taxonomies – such as the EU – has been identified as a priority within the consultation, with the government suggesting a UK iteration would utilise a recognised taxonomy format and targeted coverage, as well as implement quantified thresholds and recognise science-based metrics wherever possible. “The government is committed to learning the lessons from taxonomy implementation in other jurisdictions and gathering the feedback of market participants,” the consultation said. The consultation is open to feedback until 6 February 2025. In addition, the government announced its intention to consult on streamlining sustainability disclosures for economically significant companies.
The International Auditing and Assurance Standards Board (IAASB) has published the final version of the International Standard on Sustainability Assurance (ISSA) 5000. IAASB Chair Tom Seidenstein called on policymakers and practitioners to start adopting ISSA 5000 in their local frameworks, adding that the board will release guidance and conduct outreach activities from January 2025 to support implementation. The standard, approved in September after consultation last year, offers a framework for any sustainability assurance engagements. It can be applied to sustainability information reported across any sustainability topic and prepared under multiple frameworks. ISSA 5000 is designed to be “profession agnostic”, the IAASB said, meaning it can be used by both professional accountants and non-accountant assurance practitioners. The new standard comes as companies are increasingly reporting on sustainability and climate-related risks, opportunities and impacts in line with new sustainability disclosure standards and regulatory requirements being implemented across jurisdictions. Many incoming sustainability reporting regimes require external assurance. Companies also face rising demands from investors to provide independent third-party assurance on their sustainability claims. Seidenstein said the standard creates a global baseline that can work in every jurisdiction, including the EU due to its compatibility with the Corporate Sustainability Reporting Directive. He said ISSA 5000 addresses both limited and reasonable assurance engagements, and “works with both traditional materiality and double materiality concepts”. In a statement, the International Organization of Securities Commissions declared its support for ISSA 5000, calling the final standard an “important milestone” which can “support high-quality assurance over sustainability-related information and may enhance consistency, comparability and reliability of sustainability-related information provided to the market.”
📣 ISSA 5000 Update: We’re pleased to share that we’ve published the International Standard on Sustainability Assurance 5000 (ISSA 5000) and it is now available on the IAASB website: https://t.co/XQMo9ZQOXA
What’s on the horizon? Watch our video for what to expect in 2025. pic.twitter.com/2ypkwZZ6R6— IAASB (@IAASB_News) November 12, 2024
Non-profit CDP and the Global Reporting Initiative (GRI) have signed a memorandum of understanding at COP29 in Azerbaijan, furthering their collaboration to streamline environmental reporting. Under the agreement, CDP and GRI will build capacity and look to simplify disclosure requirements for companies, with the objective of increasing access to comparable data through “high ambition” environmental reporting. More than 14,000 organisations use the GRI Standards – through which organisations report their environmental, social and economic impacts – while more than 24,800 companies, representing over two thirds of global market capitalisation, disclosed through CDP this year. “This agreement will enhance the efficiency of environmental reporting, enabling companies to provide more comparable and actionable data,” said Sherry Madera, CDP’s CEO. “By reporting through CDP, companies can disclose GRI-aligned data directly to stakeholders and the wider global market. This is a crucial step in accelerating global climate action and ensuring businesses can meet the highest standards of transparency and accountability.” In Baku, data released by CDP showed that the world’s biggest businesses have identified nearly US$5 trillion in potential gains from tackling climate change – up 127% from US$2.1 trillion in 2018.
📢 CDP and GRI are deepening their collaboration, following an agreement signed at #COP29 in Baku.
Discover more: https://t.co/dNHTaKRpwT pic.twitter.com/bRuYydxKVl
— CDP (@CDP) November 14, 2024
