The Network for Greening the Financial System (NGFS) has said financial institutions need more high-quality climate data if they are to sufficiently integrate climate considerations into their operations and risk management practices. “Data is the cornerstone of efforts to address climate risk in the financial system,” said Sabine Mauderer, Chair of the NGFS – a group of central banks and supervisors sharing best practices on environment and climate risk management on a voluntary basis. The information note acknowledged that the measurement, estimation and collection of greenhouse gas (GHG) emissions data remains challenging, but the NGFS Expert Network on Data (EN Data) aims to address those gaps. Measures recommended by EN Data include improving data quality and consistency, harmonising the metrics utilised in reporting standards, encouraging coordination between supervisors and government agencies in the collection and dissemination of emissions data, and intensifying collaboration across public bodies, financial institutions and businesses. “We cannot manage what we cannot accurately measure,” said Li Ming Ong, Co-chair of EN Data. “This rings true for GHG emission data – which is critical to manage emissions towards achieving the net zero target and limiting global warming.” The NGFS said it hoped the note is a useful additional resource for central banks looking to bridge climate-related data gaps.

The UN Environment Programme Finance Initiative (UNEP FI) has released the first in a series of resources to help banks implement and benefit from interlinkages between the circular economy and challenges related to climate change, nature loss, and pollution. Designed for the 300+ signatories of the Principles for Responsible Banking and the wider banking sector. The guidance encourages firms to embed circularity into internal policies and processes, engage with clients in their transition to circular business models, redirect financial flows towards circular solutions and opportunities, and advocate for mainstreaming circularity. Once their sustainability targets are set, banks are also being urged to leverage the circular economy to advance in the implementation phase of their Principles for Responsible Banking journey by identifying solutions and opportunities in their portfolios. “This new guidance supports banks as they take their first steps in fostering the circular solutions that will be critical to address climate change, the pollution crisis and nature loss, while building a more sustainable, resilient and inclusive global economy for all,” said UNEP FI Head Eric Usher. “It is not just about investing in perfectly circular companies, but about providing banks – and the wider industry – with the strategies and methodologies to engage with companies in every industry to make the transition to a circular economy.” With resource extraction and processing accounting for over 55% of global greenhouse gas emissions, their use is at the centre of a “triple planetary crisis”, UNEP FI argued. As such, implementing the circular economy will be critical to achieve net zero and other sustainability objectives,. The report also highlights how adopting circular models can mitigate risks associated with linear business models as demand for raw materials intensifies and the regulatory landscape evolves. “Research shows that transitioning to a circular economy could generate significant economic benefits, estimated at US$4.5 trillion in annual economic output by 2030, through increased resilience to macroeconomic shocks and reduced costs from raw material and energy consumption, waste management and emissions control,” UNEP FI stated.

Europe is witnessing an increased construction of factories to supply batteries for electric vehicles (EV), according to ING. In a new report exploring how the EU is paving the road to electric mobility, the Dutch banking group said car manufacturers were increasingly partnering with ‘gigafactories’ – manufacturing facilities producing components and products associated with electrification and decarbonisation technologies – and investing in strategic shares further up the value chain, such as in lithium refineries or mines, to future-proof their businesses. ING’s research explored aspects including: the transition to electric mobility; the need to build infrastructure that meets the demands of that transition; the need to localise production to create more sustainable supply chains and protect against geopolitical instability; the impact and importance of EU and member state governments’ supporting transactions; and the future of EV battery value chains – including an increase in US factories dedicated to producing cathode active material and lithium hydroxide. According to ING, the growing trend of more gigafactories being built across Europe to supply EV batteries is fuelled by two factors. “The first is the need to build the infrastructure that the transition to electric mobility demands – after all, behind every new EV coming onto the road is a battery that needs to be produced,” it said. “And the second is to localise production, not only to create more sustainable supply chains but also to protect against geopolitical instability.”

The World Wide Fund for Nature (WWF) is calling on central banks, financial regulators and supervisors to take steps to limit capital flow to deforestation activities. In a new report, the NGO also called on the authorities to design rules ensuring investment portfolios are not contributing to biodiversity loss and climate change as a result of forest destruction. Deforestation and other forms of ecosystem conversion are linked to 48% of biodiversity loss and climate change, the report claimed, with agriculture the key driver. Yet, financial institutions continue to fund activities that cause deforestation. While central banks and regulators are beginning to take steps on climate risk, few have yet extended their oversight to broader environmental risks like nature loss, the WWF said. Exceptions to this include Bank Negara Malaysia, De Nederlandsche Bank and the Monetary Authority of Singapore, which are beginning to consider deforestation risk. The report provided guidance on how central banks and regulators can begin to bring the issue into their purview, including by conducting research, communicating expectations, introducing penalties, and eventually including deforestation risk in core supervisory tools such as capital requirements and credit guidance. “Central banks, financial regulators and supervisors are not meant to replace any governmental action, but they should collaborate with policymakers and play their part,” said Maud Abdelli, WWF’s Greening Financial Regulation Initiative Lead. “The less the financial system is prepared to adapt to regulations and preferences that aim to halt deforestation and conversion, the more difficult it becomes to prevent its instability.”

Gavin Newsom, the Governor of California, has proposed amendments to the state’s climate laws that would postpone their implementation by two years. Signed into law last October, Senate Bill (SB) 253 and 261 will require companies in California to disclose their Scopes 1 to 3 emissions and exposures to climate-related financial risks. Newsom’s proposed amendments, however, would delay reporting on Scopes 1 and 2 until 2028, and Scope 3 until 2029. They would also give the California Air Resources Board (CARB) more flexibility in creating the rules and phasing in Scope 3 reporting. “The implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure,” said Newsom in a public message. “I am directing my administration to work with the bill’s author and the legislature next year to address these issues [and] look forward to working […] on these modifications to ensure we achieve this bill’s goals.” The California climate disclosure rules are generally considered more stringent than the reporting requirements developed by the US Securities and Exchange Commission (SEC), which were subject to multiple delays and are now on hold pending multiple lawsuits challenging them.

Tech giant Amazon is “moving the wrong way” on climate, according to NGO Stand.earth, which expressed concerns following the company’s sixth annual sustainability report. Per the report, Amazon’s Scope 1 emissions, which include transportation, saw 7% year-on-year growth. Stand.earth argues that Amazon’s 2040 net-zero pledge is “too little, too late”, and its commitment to 100,000 electric vehicles by 2030 insufficient, given the firm’s large fleet of fossil-fuel powered machines. The NGO also underscored that Amazon was “backpedalling on its weak existing promises”, such as the cancellation of its Shipment Zero pledge Iast year. The firm’s shipping and logistics operations have been linked to premature death, heart attacks, respiratory disorders, and asthma among its employees. It has also so far failed to follow through on its pledge to submit a detailed plan to reduce climate pollution through the Science-Based Targets Initiative. “In this year’s sustainability report, Amazon leaders had an opportunity to show us that they are finally getting serious about the climate. Instead, the report shows [the company] is moving the wrong way,” said Joshua Archer, Senior Global Corporate Campaigner at Stand.earth. “The company is hoping its weak long-term promises will distract from its continued expansion of polluting planes, trucks, and vans.” Amazon has also come under fire for the treatment of its employees in recent years, which have resulted in renewed efforts to form unions within its workforce. Last week, more than 3,000 workers at the company’s Coventry warehouse were due to vote for the first time on whether to be represented by a trade union for collective bargaining on rights and pay.

The International Corporate Governance Network (ICGN) has issued guidance to investors on how to interpret sustainability reporting assurances, aiming to tackle “immature standards” and varying regulatory regimes. The ICGN said sustainability reporting was at an early stage in many companies and markets, raising the risk of misstatements due to fraud, errors or “over-optimism” from management. This means much of the information is not “ready for assurance”, it said. The new guidance distinguishes between higher level ‘reasonable assurance’, and less rigorous ‘limited assurance’. It also distinguishes between ‘unqualified conclusions’, which suggest sustainability reporting is reliable and wholly in line with regulations; and ‘modified conclusions’, which suggest error, disagreement, or lack of sufficient evidence. The report also provides guidance on the independence and expertise of assurance providers, transparency of their auditing, and connectivity with financial statements. In addition, the ICGN provided eight questions investors can ask company boards about their sustainability reporting and assurance processes. “We are in a transition period, where companies and assurance providers are building capacity, global standards are being adopted and must be implemented, and market participants are developing their understanding of sustainability assurance,” the report said, urging companies to “introduce robust governance and internal controls, and [ensure] external assurance is of high quality, regardless of who conducts it”. This is key to foster trust in corporate sustainability reporting, the ICGN said.

France’s markets watchdog the Authorité des Marchés Financiers (AMF) has published the findings of three supervisory initiatives on sustainable finance. As part of its supervisory priorities for the 2023-24 period, the AMF had set itself the objective of stepping up efforts to promote more sustainable finance – both in terms of products and marketing. As part of this effort, the watchdog assessed a panel of asset managers on how they have structured themselves to take account of sustainability risks, and looked at the marketing materials of funds incorporating non-financial aspects – as well as the role played by distributors. “While integrating the topic of sustainable finance into [our] traditional inspections, [we are] continuing [our] thematic inspections with a pedagogic aim, given the recent nature of European regulations and the need to provide support to market participants,” the AMF said in a statement. The watchdog focused its analysis on two specific aspects: asset managers’ implementation of the Sustainable Finance Disclosure Regulation (SFDR); and the marketing materials of French and foreign Collective Investment Undertakings (CIUs) published by distributors in France. Two other series of short thematic inspections have either been or will be initiated this year in the field of sustainable finance, the AMF said. One will assess how investment service providers take account of clients’ sustainability preferences, while the other will examine asset managers’ voting and shareholder engagement policies. “The AMF has made sustainable finance one of its six strategic orientations, and is increasingly integrating it into its supervisory framework,” said AMF Chair Marie-Anne Barbat-Layani. “However, the recent and complex nature of the regulations continues to require a great deal of pedagogy: the aim of this work is to clarify good and bad practices and the regulator’s expectations.”