Unveiling the Future of Climate Disclosures: ISSB Takes the Helm from TCFD

ESG Policy Roundup: A Week of Significant Shifts and Investments

This week was marked by significant developments in the ESG landscape. From regulatory changes to substantial investments in green initiatives, the week witnessed a series of events that could potentially shape the future of sustainable finance and corporate responsibility.

• The International Sustainability Standards Board (ISSB) is set to take over the responsibilities of the Task Force on Climate-related Financial Disclosures (TCFD), marking a significant shift in the global ESG reporting landscape.

• Algebris, a global asset management company, successfully raised €260 million for its Green Transition Fund, demonstrating the growing investor interest in sustainable finance.

• Investors and banks are pushing back against the European Union's plan to ease sustainability reporting rules, highlighting the importance of transparency and accountability in ESG practices.

• Schroders, a global investment manager, has increased the accessibility of its Global Sustainable Food and Water Fund to UK investors, reflecting the growing demand for sustainable investment options.

• The U.S. Environmental Protection Agency (EPA) proposed updates to greenhouse gas emissions reporting requirements for the oil and gas sector, a move that could significantly impact the industry's approach to climate change.

The past week's developments underscore the dynamic nature of the ESG landscape. As regulatory bodies, investors, and corporations continue to navigate the complexities of sustainable finance and corporate responsibility, the importance of transparency, accountability, and innovation remains clear. The coming weeks and months will undoubtedly bring further changes, and all stakeholders must be prepared to adapt and respond to ensure the continued growth and effectiveness of ESG practices.

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ISSB Assumes TCFD's Mantle in Climate-Related Disclosures Oversight

The International Sustainability Standards Board (ISSB) of the IFRS Foundation is set to take over the monitoring of companies' climate-related disclosures from the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD) starting next year. This shift comes in response to a request from the FSB and signifies a crucial step in the ongoing consolidation of sustainability reporting standards.

• The ISSB recently published its global standards for sustainability and climate reporting, which incorporate the TCFD recommendations. The TCFD, established in 2015, has been the industry standard for climate-related disclosure.

• The ISSB was launched in November 2021 at the COP26 climate conference with the aim of developing IFRS Sustainability Disclosure Standards. These standards are designed to provide a global baseline of disclosure requirements for understanding the impact of sustainability risks and opportunities on companies.

• The FSB acknowledged the publication of the new ISSB standards as a culmination of the TCFD's work. It thanked the TCFD for its significant contribution to improving climate-related financial disclosures worldwide.

The transfer of monitoring responsibilities from the TCFD to the ISSB marks a new era in climate-related financial disclosures. It further clarifies the landscape of ESG initiatives for companies and investors, building on the TCFD's legacy. The impact of this transition on the quality and consistency of climate-related disclosures will be a key area to watch in the coming years.

Algebris Investments' Green Leap: €260M Raised for Sustainable Private Equity Fund

Global asset manager, Algebris Investments, has successfully raised over €260 million for its Algebris Green Transition fund. This sustainable investing-focused private equity fund marks Algebris' first venture into the private equity sector.

• The recent close of a €70 million fundraising round has boosted the fund's total to over €260 million. Algebris aims to exceed its current fundraising target of €300 million in the coming months.

• Algebris Green Transition fund's investment strategy is centered on sustainable transformation pillars such as Energy Transition, Circular Economy, and Smart Cities & Agritech. The fund aims to bolster companies in these sectors through expansion, internationalization, and consolidation.

• The fund targets companies with proven earnings potential, resilient business models, and sustainable long-term strategies, focusing primarily on businesses in Italy and across Europe.

• Led by Managing Director Luca Valerio Camerano, the fund complies with Article 9 of the SFDR regulation, reinforcing its commitment to sustainable investment practices.

The successful fundraising rounds and the quality of investors attracted to the Algebris Green Transition fund underscore the growing confidence in sustainable investment strategies. The fund's focus on technologically advanced opportunities and application of ESG variables presents a promising avenue for value creation for investors and the companies they invest in. This initiative by Algebris Investments marks a significant stride in the evolution of sustainable private equity funding.

Investors and Banks Challenge EU's Eased Sustainability Reporting Rules

A coalition of investment and sustainable investing groups, along with over 90 asset managers, are pushing back against the European Commission's proposed changes to the European Sustainability Reporting Standards (ESRS). The proposed changes, aimed at easing the upcoming Corporate Sustainable Reporting Directive (CSRD), have raised concerns about the potential impact on investors' ability to access crucial sustainability-related information.

• The CSRD, set to apply from 2024, will expand the number of companies required to provide sustainability disclosures from 12,000 to over 50,000. It will also introduce more detailed reporting requirements on company impacts on the environment, human rights, and social standards.

• The EU Commission's proposed changes to the ESRS include allowing companies to focus on reporting on sustainability factors that they consider material to their businesses. This move has raised concerns about the potential for inconsistent reporting and reduced transparency.

• The investor coalition's statement calls for maintaining mandatory climate disclosures, including Scopes 1, 2, and 3 emissions, and transition plans. It also calls for mandatory reporting for items relevant to investor regulatory requirements, such as SFDR reporting.

• The Association for Financial Markets in Europe (AFME) echoed these concerns, highlighting the potential conflict between the proposed rules and banks' ability to meet their own sustainability-related reporting requirements.

The pushback against the EU Commission's proposed changes to the ESRS underscores the importance of robust and consistent sustainability reporting for investors and financial institutions. The outcome of this debate could significantly influence the future of sustainability reporting in the EU and beyond, with potential implications for the transparency and comparability of corporate sustainability disclosures.

Schroders Amplifies UK Reach of Global Sustainable Food and Water Fund

Schroders, the global investment manager, has announced the UK onshoring of its Global Sustainable Food and Water Fund, a move aimed at enhancing accessibility for UK investors. The fund, initially launched in October 2021, invests in companies worldwide that contribute to the sustainable provision of food and water.

• The fund is managed by Mark Lacey, Felix Odey, and Alex Monk, and targets emerging technologies and strategic industries that are integral to the transformation of food and water systems.

• The investment approach combines bottom-up and top-down inputs, allocating to between 35-60 stocks. All companies within the investment universe align with at least one of five key sustainability areas: climate change & greenhouse gas emissions, biodiversity, pollution & waste, water management, and health and nutrition.

• The fund forms part of the Schroders Global Transformation Range, a suite of funds offering long-term exposure to powerful and persistent themes shaping the world's future.

Schroders' move to onshore its Global Sustainable Food and Water Fund in the UK underscores the growing investor interest in sustainable investment opportunities. The fund's focus on companies that contribute to the sustainable provision of food and water highlights the potential for investment to drive meaningful change in these critical sectors. As the demand for sustainable investment options continues to rise, funds like these are likely to play an increasingly important role in the global financial landscape.

EPA's Bold Move: Revamping GHG Reporting for Oil and Gas

The U.S. Environmental Protection Agency (EPA) has proposed significant amendments to the reporting requirements for petroleum and natural gas systems under its Greenhouse Gas Reporting Program. The move aims to enhance the accuracy of reported greenhouse gas emissions, including methane, a major contributor to climate change.

• The proposed revisions align with the Methane Emissions Reduction Program under the Inflation Reduction Act, aiming to fill gaps in total methane emissions reported by facilities. This includes adding newly covered sources like "other large release events" that account for abnormal methane emission events.

• The amendments propose new or revised calculation methodologies to improve the accuracy of reported emissions data for methane and other greenhouse gases. They also suggest the use of new technologies such as remote sensing for quantifying emissions from large release events.

• The EPA is also looking to collect data at a more granular level to enhance the verification and transparency of the data collected. Furthermore, the agency is proposing determinations to establish whether data submitted under the proposed revisions would be entitled to confidential treatment.

The EPA's proposed amendments signify a crucial step towards a more accurate and comprehensive reporting of greenhouse gas emissions in the oil and gas sector. Set to take effect from January 2025, these changes underscore the Biden administration's commitment to tackling climate change. The impact of these revisions on the industry's reporting practices and overall emissions will be keenly observed in the coming years.