ESG and Sustainability News


Sustainability Highlights Monthly Briefing
March 2022

Legislation & Regulation
EU member states agree stance on corporate sustainability disclosure legislation
EU member states have agreed on a common approach to the proposed Corporate Sustainability Reporting Directive, which builds upon the 2014 Non-Financial Reporting Directive. The member states have largely endorsed the European Commission’s original draft, but they would restrict the legislation’s application to around 11,000 companies rather than the 50,000 originally envisaged. The French EU Council presidency will conduct negotiations with the European Parliament, which may well favour the Commission’s more expansive scope. The new directive will extend transparency requirements to all large and listed companies, require certification of sustainability reporting, require greater details and standardised reporting, and improve accessibility of information through a publication requirement.
Best source: Börsen-Zeitung
(subscription required, in German)
See also: EU Council

Greenwashing could lead to wave of mis-selling enforcement actions: experts
Widespread greenwashing involving supposedly sustainable investment products could lead to a wave of mis-selling regulatory enforcement actions, on the scale of actions over payment protection insurance or mortgage loan mis-selling, according to industry and legal experts. Some of the terminology used in marketing material is vague, which could lead to accusations of inconsistency, omissions or lack of clarity, says Pallas Partners’ Fiona Huntriss. Deficiencies in the sustainability characteristics of funds sold as green will soon come to light, says Tariq Fancy, a former chief investment officer for sustainable investing at BlackRock, who now works for a nonprofit. Luke Fletcher, a partner at Bates Wells, says the wording of the 2015 Paris Agreement will become de facto the legal standard for companies and funds.
Best source: Financial Times
(subscription required)

Sustainable Finance Trends
Fund managers say they are looking to sell Russian assets on ESG grounds
Asset managers including Abrdn, Storebrand, DWS and Nordea are attempting to sell their Russian assets as sanctions take effect. Abrdn and Storebrand say they are divesting on ESG grounds, despite the existence of long-term concerns about governance issues in Russia. The asset managers are struggling to carry out their planned divestment with the Moscow Exchange closed, while Russia has adopted a temporary ban on foreign investors selling securities. The ban on some major Russian banks using the SWIFT payment messaging network is also likely to make it hard for fund managers to receive any proceeds from asset sales.
Best source: Citywire
(registration required)

MSCI downgrades Russia and Belarus ESG sovereign ratings
MSCI ESG Research has downgraded its ratings of the sovereign bonds of Russia from BBB to B, and from BB to B for Belarus. It says the downgrades reflect the long-term sustainability and competitiveness of the economies of each country as sanctions are introduced. Ranging from AAA to CCC, MSCI’s ESG government ratings, which are calculated using a quant-based approach, apply a 50% weighting to environmental factors, 25% to social impact and 25% to governance.
Best source: Investment Week

Investments & Products
Sustainable ETF inflows stood at $9.81bn in January
Global net inflows into ESG exchange-traded funds amounted to $9.81bn in January, according to data provider and consultancy ETF Global Insight, down from $19.76bn a year earlier. Total sustainable ETF assets fell by 3.2% year on year to $379bn, partly as a result of falling equity market prices.
Best source: ETF Express
See also: ETF Database
See also: ETF Global Insight

Morningstar cuts 27% of European sustainable funds from list amid greenwashing concern
Morningstar has removed 1,600 investment vehicles from its list of European sustainable funds, 27% of the total with $1.2trn in assets under management, saying only half of the funds marketed as sustainable under the EU’s Sustainable Finance Disclosure Regulation meet Morningstar’s own criteria. The research firm’s list now includes 4,461 European sustainable funds with $2.23trn in assets, compared with 6,659 funds with $4.6trn that are categorised under article 8 or 9 of the SFDR. There is concern about greenwashing, with critics of the EU legislation saying its criteria are currently too loose, and Morningstar says it uncovered issues with some funds such as use of ambiguous language in legal filings.
Best source: Financial Times
(subscription required)
See also: Citywire

VitalBriefing Sustainability Insights
Sustainability and taxonomy: Europe’s green rules are starting to bite. Are you ready?
Written by VitalBriefing’s editor-in-chief Simon Gray, this article will help you navigate the plethora of inconsistent standards and measures and acute shortage of data plaguing the sustainable finance sector.
Best source: VitalBriefing

Is impact investing better for the world than ESG investing?
Too many financial professionals fail to understand what it means to invest for impact. In this interview from VitalBriefing’s Sustainability Matters series we talk to Sustainability Investors LLP’s Alexis Figeac who, among other topics, explores what is driving the surge in interest in impact investing, whether impact investing is better for the planet than ESG investing, and what investor intentionality is, why it is important and why you should care.
Best source: VitalBriefing

COP26 is nowhere near enough. Here’s how investing can help
VitalBriefing interviews sustainable finance expert Florian Heeb, who laments that although the progress made at COP26 is not enough to keep global warming below 1.5ºC, “it’s the only thing we have.” So what does that mean for the future of the planet? And what can the investment world do to really help? Read the full article – the first in a two-part interview – to find out.
Best source: VitalBriefing

Divestment, engagement and cost of capital: the fossil fuel dilemma
You probably know there’s a fossil fuel dilemma. But do you fully understand how it is impacting the finance sector? The answers aren’t so simple, explains Florian Heeb. In this second of a two-part interview, he discusses why the profit case for fossil fuels still exists, and how increasing demand for sustainability, impact investing and ESG among asset managers, banks and regulators is affecting the financial landscape.
Best source: VitalBriefing

Don’t Miss the Full Version of This Briefing…
This free briefing is a selection of key stories from VitalBriefing’s Monthly Sustainable Finance News & Insights Briefing, prepared by our top financial journalists and identifying the critical trends and major European and global developments in Legislation & Regulation, Sustainable Finance Trends and Investments & Products.