The Taskforce on Nature-related Financial Disclosures (TNFD) and European Financial Reporting Advisory Group (EFRAG) have published an outline of the correspondence between their respective disclosures and metrics. The TNFD’s framework and EFRAG’s European Sustainability Reporting Standards (ESRS) have a high level of commonality, the two bodies determined, with all 14 TNFD recommended disclosures reflected in the ESRS. Areas of alignment include: both the TNFD and ESRS recommend the need to disclose nature-related impacts, risks and opportunities; the ESRS specify double materiality disclosures, where the TNFD enables approaches including double materiality; and the ESRS state that companies may conduct biodiversity and nature-focused materiality assessments using the TNFD’s LEAP approach. “As market participants from over 45 countries have started to assess and report on their nature-related issues aligned with our recommendations, many have asked us for further guidance to ensure their reporting complies with their mandatory EU Corporate Sustainability Reporting Directive requirements,” said Tony Goldner, Executive Director of TNFD. “We look forward to continuing to collaborate with the EU in the development and sharing of practical guidance to ensure high-quality, consistent sustainability reporting disclosures.” The correspondence table follows two years of close collaboration between EFRAG and TNFD as both sets of standards were developed in parallel.

Having more women on the boards of US banks is likely to reduce the institutions’ exposure to climate risk, a new academic paper has found, highlighting the positive relationship between gender diversity and environmental performance. The study, entitled ‘Climate Transition Risks of Banks’, examined 34 major US banks including Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley. It found that while overall emissions of banks’ customers had reduced since 2015, this had been achieved by increasing the number of low-emissions customers, rather than dialling down loans to high emitters. The latter, it found, had in fact also risen. The majority of exposure was through syndicated loan portfolios, exposing banks to regulatory changes and climate-related litigation. Two key findings stood out, the authors said: first, that bigger, more highly-leverage banks were likely to have greater exposure to climate risk, posing a threat to the US financial system; and second, that there was a clear correlation between increased gender diversity on boards and lower exposure to climate risk. “The study highlights the challenges banks face in managing climate transition risks, which are complex to identify, price, and hedge,” said Professor Dr Sascha Steffen, one of the report’s authors. “This is due to the systematic nature of these risks, insufficient firm disclosures, and a lack of hedging instruments.” The paper was written by researchers at Frankfurt School of Finance & Management, the University of Zurich and the Swiss Finance Institute.

The UK’s financial watchdog has launched its first enforcement investigation into a company over climate-related issues, environmental law charity ClientEarth has revealed. In response to a Freedom of Information (FOI) request, the Financial Conduct Authority (FCA) disclosed one active enforcement case, opened in July 2023. The regulator did not provide any further information on the type of firm or misconduct it was probing, ClientEarth said. The watchdog had previously refused to reveal what greenwashing or climate-related cases it was investigating, despite its transparency obligations as a public authority. According to ClientEarth, the FCA repeatedly exceeded the FOI timeframes for review, leading the charity to escalate the matter in April by filing a complaint to the Information Commissioner. The investigation is still ongoing, it added. “One active investigation is welcome news,” said Megan Clay, Lawyer at ClientEarth. “However, one case is still too few, and the FCA has suggested that this investigation does not relate to greenwashing.” The charity warned that investors and consumers may be receiving inaccurate information due to inaction by the regulator, claiming the FCA lagged its US and Australian counterparts, which have handed out several fines to financial institutions for breaching existing law. “The good news is that the FCA is now in a strong position to act,” Clay added. “A new anti-greenwashing rule took effect just last month, and campaigners have already urged the regulator to investigate climate-related claims by the UK’s biggest high-street banks.” Separately, the UK Advertising Standards Authority has banned misleading climate-related ads from Shell and HSBC, and a Competition and Markets Authority investigation into three fashion brands – ASOS, Boohoo and George at ASDA – has led the companies to pledge to use only “accurate and clear” claims earlier this year.

Investor network Ceres has published its second annual report assessing major US insurers’ climate risk strategies, identifying unequal progress and persistent challenges. Evaluating responses by 516 insurance firms to the Task Force on Climate-related Financial Disclosures-aligned (TCFD) National Association of Insurance Commissioner’s climate risk disclosure survey, Ceres concluded that while some insurers had made strides in integrating climate-related risks and opportunities into their business operations, there remained “significant gaps and disparities across the sector”. A total 94% of the assessed firms reported on climate risk management, 86% on strategy, 81% on governance and 29% on metrics and targets. “The overall low performance in the metrics and targets area emphasises the continued challenges insurers are experiencing as they grapple with developing and adopting risk measurement and management processes,” Ceres said. Only 26% reported on parameters across all four of the TCFD categories, the report noted. Ceres identified improvements in some sub-areas, such as how insurers are reporting on Scopes 1-3 emissions but said disclosures declined in others – such as describing the role that management plays in assessing and managing climate-related risks and opportunities. Nonetheless, the increasing adoption of climate scenario analysis by insurers is encouraging, Ceres said, as it demonstrates that firms understand the importance of assessing the potential long-term negative impacts of climate change on their financial performance. Between 2017 and 2023, 137 billion-dollar disasters cost over US$1 trillion in damages, Ceres noted.

A record-breaking first quarter has put the sustainable bond market on track to top US$1 trillion in issuance for the first time. According to a quarterly report from the Climate Bonds Initiative (CBI), US$272.7 billion of aligned green, social, sustainability, sustainability-linked and transition (GSS+) bond volume was added in Q1 2024. That total was 15% higher than Q1 2023’s US$237.2 billion, and 41% above Q4 2023’s US$193 billion, also beating the previous busiest quarter – Q1 2021, which saw deal volume worth US$272 billion. CBI attributed the high levels of activity partly to expectations of a rate cut by the US Federal Reserve, which it said encouraged investors to lock in prevailing yields, resulting in strong appetite for increased supply. Green bonds made the largest contribution (72%) to the Q1 2024 total, also reaching a new record with volume of US$195.9 billion. A further milestone was reached with total green bond volume crossing US$3 trillion since market inception in 2006, also contributing to cumulative volume of US$4.7 trillion in GSS+ bonds. In the sovereign GSS+ market, US$32.2 billion of new bonds were issued by 11 issuers, while 16 others tapped existing bonds contributing US$20 billion. The largest deal was Japan’s US$10.6 billion issuance to fund its clean energy transition programme. This activity helped the aligned sovereign GSS+ market pass the US$0.5 trillion milestone, reaching US$538.3 billion. “The sustained growth in this market reflects the enthusiasm of issuers to decarbonise their operations as swiftly as possible and seize the opportunities for growth,” said Caroline Harrison, Director of Technical Development at the CBI. “The leading role that sovereign issuers are taking in this space suggests the urgency of the transition is being endorsed from the top down.” ‘Aligned’ bonds refers to those meeting the requirements outlined in the CBI’s screening methodology.

Research from shareholder advocacy group As You Sow has revealed that 55 S&P 500 companies are channelling hundreds of billions of dollars into nuclear bombs, cluster munitions, and other weapons through employee retirement 401(k) plans. Every plan analysed had companies linked to nuclear and controversial weapons in their top 100 equity holdings – with RTX Corp, Boeing, and GE Aerospace among the most frequent investments. The retirement plans of healthcare and pharmaceutical companies were covered in the analysis, as well as multinationals such as Disney, Microsoft, Comcast and Whole Foods. The plans included in the study accounted for a total US$1.2 trillion in employee savings. “Employees’ retirement savings are being funnelled into companies that manufacture weapons of mass destruction, and it’s happening on autopilot, without their knowledge,” said Andrew Behar, CEO of As You Sow. “Employees need to be aware of this practice. Most employees would like their retirement funds invested in companies that are building a better, more sustainable future rather than in war, death, and destruction.” The analysis was performed as part of As You Sow’s Weapon Free Funds – a tool built to help responsible investors identify companies involved with arms manufacturing, using research from non-profits and ethical investment firms that is cross-referenced with the holdings of mutual and exchange-traded funds. The report covered both stock and bond investments – with the latter especially concerning given their proceeds can be used by military weapon manufacturers to expand arms and ammunition production, As You Sow said. Investors have previously raised concerns about the humanitarian impacts of conventional military weapons, as well as potential violations of international human rights laws. They have also brought shareholder proposals requesting human rights impact assessments at RTX Corp, Lockheed Martin and Northrop Grumman.